Crude oil prices are rising on Friday amid tightening of OPEC production. However, the gains remain limited due to growing US production and global economic slowdown.
The futures on US crude oil WTI rose by 0.87% to 57.72 USD per barrel, while the Brent appreciated by 1.07% to 67.02 USD per barrel.
According to traders, the oil markets are currently tightening. In Venezuela, oil exports dropped by 40% to about 920,000 barrels per day since the US government imposed sanctions on the country’s oil industry on January 28. The political crisis in the country is also affecting production. This is happening at a time when OPEC has shrunk its output by about 1.2 million barrels per day to support prices.
Meanwhile, the EIA reported that the US stockpile of crude fell by 8.6 million barrels for the week ending on February 22, while analysts had expected a gain of 2.8 million barrels. The inventories of gasoline and distillate fuel, which includes diesel, also dropped week-over-week.
Global oil markets look tenser than most people expected at this time of year, but dozens of unsold barrels can quickly build up and lead to over-saturation.
The US crude oil production has reached record levels of over 12 million barrels per day.
The report also showed that the US exported a net 162,000 barrels per day of crude and petroleum products. It marked just the second time on record, following a brief occurrence in late November, that the US was a net petroleum exporter on a weekly basis. Crude exports totaled more than 3.3 million barrels per day, compared with an all-time high of 3.6 million barrels in the prior week.
Global fuels demand analysis
According to a study, the global demand for fuels is expected to slow down this year in the context of a slowdown in the global economy.
Production activity in China declined for the third month in a row after the world’s second-largest economy continues to struggle with weak export orders. Weakness is felt throughout the region. South Korea’s exports shrank in February at the fastest pace in nearly three years, as demand from its core market China has cooled further.
However, fuel consumption, especially in the developed economies of Asia, which are key drivers of world oil demand, has so far been retained.
Diesel fuel consumption in India, for example, is expected to rise to a record high this year, with a strong 7% growth in demand for trucks.
Global liquid fuels production to outpace demand
According to the latest report of the Energy Information Administration (EIA), the global liquid fuels production was expected to exceed global consumption through 2020. The EIA forecast that higher U.S. crude oil production growth and slightly lower global oil consumption will offset the short-term supply reductions. As a result, global petroleum liquids stocks increase and prices remain relatively flat.
According to EIA’s February Short-Term Energy Outlook (STEO), global liquid fuels inventories grew by an estimated 0.5 million barrels per day in 2018 and will grow by 0.4 million barrels per day in 2019 and by 0.6 million barrels per day in 2020.
The EIA expected the US crude oil production to average 12.4 million barrels per day in 2019 and 13.2 million barrels per day in 2020, with most of the growth from the Permian region of the state of Texas and New Mexico.
When it comes to oil prices, EIA forecast Brent spot prices will average 61 USD per barrel in 2019 and 62 USD per barrel in 2020, compared with an average of 71 USD per barrel in 2018.
EIA expected that West Texas Intermediate (WTI) crude oil prices will average 8 USD per barrel lower than Brent prices in the first quarter of 2019 before the discount gradually falls to 4 USD per barrel in the fourth quarter of 2019 and through 2020