The last three years have seen the oil market in a state of oversupply, despite OPEC-led countries reducinged their output in 2016 and the extended it into this year.
The EIA said that USA crude production will average 9.9 million barrels a day, down from a previous forecast of 10.1 million barrels a day in what I predict will be the first of more production downgrades in the future.
A joint ministerial committee from OPEC and non-OPEC countries including Saudi Arabia and Russian Federation, the world's biggest oil producers, will meet on 24 July to discuss compliance with a supply-cut pact and review the rise in output from Nigeria and Libya. The exemption was granted to allow both countries to rehabilitate oil infrastructure that had been sabotaged by militants in recent years, giving them leeway to rehabilitate their industries.
We continue to maintain bearish outlook in oil and expect WTI to decline towards $40 per barrel.
Gasoline demand tends to increase in the northern hemisphere summer as US drivers take to the road and this has helped support prices in the short term. What we are now seeing is a pullback in shale oil production that will hold back USA oil output of shale until the economics start to make more sense. This was down from last month's forecast 680,000 bpd year-over-year increase.
Benchmark Brent futures were up 84 cents, or 1.8 percent, at $47.72 a barrel by 12:15 p.m. EDT (1615 GMT), while U.S. West Texas Intermediate crude was up 82 cents, or 1.9 percent, at $45.22 per barrel.
API reported a draw of 8.13 million barrels of crude oil.
It may be time for OPEC and US shale producers to pump the brakes. USA production rose 0.6% in the past week to 9.4 million barrels a day.
The Energy Information Administration (EIA) has cut the 2018 USA oil output forecast by 1 per cent to 9.9 mln bbls/day. Crude oil exports totaled 768,000 barrels a day last week, and daily average exports are up more than 76% year over year to 760,000 barrels a day. USA crude gained 63 cents, or 1.4% to $45.67 U.S. Production declined and major oil producers were forced to scale back investment.
Oil has traded below $50 a barrel since May amid concern that rising global supplies will offset curbs by the Organization of Petroleum Exporting Countries and its partners including Russian Federation.
The U.S. vaulting into the top ranks of exporters would have been unthinkable even a few years ago.