Oil: Russia remains outside of the OPEC out of choice

Venezuela’s oil production is already expected to continue to decline -output is expected to average 1.43 million barrels per day (bpd) this year, down from 2.18 million bpd in 2017. The IEA forecast firmly puts U.S. in the driver’s seat in driving global oil production. As a result, Opec’s crude oil capacity will grow by just 750,000 bpd by 2023, the IEA said.

Oil prices tumbled on Wednesday as financial markets slid amid concerns that Washington’s plans for import tariffs could spark a trade war, and after US government data showed an increase in crude inventories and output. But with the number of drilling rigs up nearly a third over the a year ago, United States production has surged above 10mn bpd, surpassing the all-time high set in 1970.

But the price rebound has also encouraged USA shale companies to pump more oil, putting downward pressure on oil prices and threatening to undermine OPEC’s strategy.

Besides Libya and Nigeria, the other 12 OPEC members given individual allocations under the production agreement maintained high collective compliance at 145% for February and 114% over the course of the deal, according to Platts calculations. Rising oil prices are also encouraging shale companies to ramp up drilling.

IEA said India follows China in terms of growth in the demand for oil, and together the oil demand of those two countries accounts for about half of the growth in global oil demand.

“The No. 1 overall message, non-OPEC supply growth is very, very strong, which could change the parameters for the oil markets in the years to come, led by the United States, but also Brazil, Canada and Norway”, IEA Executive Director Fatih Birol said Monday according to the Journal. The costs may hit the U.S.in many ways: from the higher cost of steel and aluminium inputs into a wide array of products up to retaliatory measures from countries around the world.

“Of course, for this to materialize, the capex by the energy companies will have to watched and this capex can also be the growth driver for the USA economy in the years to come, even if prices remain at the current levels”, he added.

Closer to 2023, global markets will start to tighten and the IEA has warned that more investment is needed to meet growth in consumption and to make up for production lost to natural declines.

In fact, most analysts are positive about this market, so much so that the average price estimated for 2018 of the Brent futures is $ 63.7 per barrel, + 16% on the average value of 2017.

Crude inventories rose by 5.661 million barrels in the week to 426.880 million barrels, data from the American Petroleum Institute showed on Tuesday. By the way, Iran is the OPEC’s third-biggest producer of crude oil.

That, for sure, puts downward pressure on crude prices, disrupting Opec’s plans to rebalance the markets. The global benchmark traded at a $3.08 premium to May WTI.