A drilling rig – Wikimedia/Dragonoil
SINGAPORE - 8 February 2018: Oil prices eased on Thursday, taking Brent crude to a 2018 low, as soaring U.S. output undermined OPEC efforts to tighten markets, although a North Sea pipeline outage and record Chinese imports offered support.
Brent crude futures LCOc1 were at $65.39 per barrel at 0525 GMT, down 12 cents, or 0.2 percent, from the previous close. Brent slipped to its lowest for the year at $65.12 a barrel early in the session.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $61.60 a barrel. That was down 19 cents, or 0.3 percent, from the last settlement, though still some way off its $60.10 2018 low on Jan. 2.
“Brent has now turned negative for 2018 while WTI isn’t looking great either,” said Fawad Razaqzada, market analyst at futures brokerage Forex.com.
The dips follow bigger falls on Wednesday, when crude touched one-month lows and erased much of 2018’s early gains.
Some support on Thursday came from the second outage in as many months on the 450,000 barrels per day (bpd) Forties pipeline network, Britain’s biggest, which supplies much of the crude underpinning Brent futures, as well as record Chinese January imports of 9.57 million bpd.
But the biggest market driver was U.S. production. What’s long been expected is now official: U.S. crude oil output averaged above 10 million bpd for the first time since the early 1970s last week, reaching 10.25 million bpd. [
Until the early 2000s, the United States was oil starved, importing a peak of 12 million bpd.
But in one of the steepest rises of any oil producer in modern history, U.S. output has surged by more than 20 percent since mid-2016, undermining OPEC’s and Russia’s efforts to tighten the market and prop up prices by withholding production.
At 10.25 million bpd, U.S. output is now higher than the previous 10.044 million bpd record from back in 1970.
It’s above that of top exporter Saudi Arabia’s and within reach of Russia‘s.
“What surprised the most was the large spike in oil production to 10.25 million barrels per day which was significantly higher than 9.92 million from the previous week,” Razaqzada said.
“Clearly, the data points to an imbalanced market and oil prices have responded by turning sharply lower,” he added.
Weighing further on prices, U.S. commercial crude stocks C-STK-T-EIA rose by 1.9 million barrels in the week to Feb. 2, to 420.25 million barrels.
The U.S. Energy Information Administration (EIA) this week also upped its 2018 average output forecast to 10.59 million bpd, up by a whopping 320,000 bpd from its last forecast just a week earlier.