Oil prices hit highest level in three years — Kuwait- KAMCO

Oil prices hit highest level in three years — Kuwait- KAMCO

The International Energy Agency said in its monthly market report that USA oil production, which has already risen to its highest level in almost 50 years, will push past 10 million barrels a day in 2018 as higher prices entice more producers to start pumping.

It was the first time that Saudi Arabia had publicly raised the possibility of a new form of coordination among oil producers after 2018.

Venezuela saw a sharp drop in production, to the tune of 89,000 barrels per day.

But the upshot, said the agency, is likely to be a sizeable pick-up in non-OPEC production.

Oil prices fell to a one-week low on Friday, as a leading energy monitor predicted USA crude production would hit a high this year, surpassing output from Saudi Arabia and rivaling that of Russian Federation.

"We don't feel that Opec alone can do it", Al-Falih said in the interview.

"Barring any geopolitical upsets, the record 1 billion-barrel oil long held by funds at the beginning of 2018 could pose a potential challenge to the current bullish momentum", said Ole Hansen, head of commodity trading at ING. OPEC and its allies also want to find a way to wind down their limits on production- which are costing these nation's millions of dollars every day as prices rise-without spooking investors.

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In particular, producers in the United States have been amping up their output and will likely continue to do so, essentially wrecking the work OPEC has done to this point.

The 14 members of the Organization of the Petroleum Exporting Countries (OPEC) had averaged a compliance rate of 95 percent through 2017, falling from a production rate of 39.6 million to 39.2 million barrels a day, as stated by the IEA. "OPEC are fearful of not only the shale response, but of deep water and of oil sands from Canada".

Market tightening in the final months of 2017 was evident and continued into 2018. Distillates - used to make diesel and heating oils - fell by 3.9 million barrels. Thats compared to a 4.1-million-barrel build in the prior week.

However, as OPEC continues with its targeted production agreement, the oil has slowly turned from bearish to bullish on Middle East tension and as the market nears rebalancing.

Production was down 9.49 million bpd at the start of 2018, as the cold weather prompted a shutdown on some production. However, some analysts suggest that this could surprise on the downside with a risk of up to 500,000 barrels a day in production going down.

"Solid refinery activity has been one component behind the ongoing streak of crude draws, which in turn have helped keep alive an oil rally that has lifted prices to their highest levels since December 2014", S&P Global Platts Oil Futures Editor Geoffrey Craig said in the emailed report.