Opec ties to oil allies will stretch through 2019

Russian Energy Minister Alexander Novak

Russian Energy Minister Alexander Novak

The agency in its report reiterated what everyone either intimately or remotely acquainted with the energy industry knows already: that American oil production, which has already risen to its highest level in almost 50 years, will push past 10 million barrels per day (bpd) in 2018 thanks to higher prices encouraging more producers to start pumping.

It's too early in 2018 to discuss stabilization for oil prices, which are down 2 percent from their peak, but up 3.5 percent so far, a Russian official said. "The mechanism hasn't been determined yet, but there is a consensus to continue", said Saudi energy minister Khalid al-Falih, speaking in Oman. A agreement to cut production went into effect at the beginning of 2017, and is set to expire at year's end after several extensions.

Oil prices are now at levels at which USA production could substantially increase.

Brent crude, the worldwide oil benchmark, rose 16 cents to $68.77 a barrel.

Mallinson also thought analysts are mistaken in thinking OPEC's only options are to either stick with the current level of supply cuts or to allow flat-out global production.

"As we get into the new year now and another season of refinery maintenance and much lower gasoline demand, I see the base case fundamentally as arguing for lower prices from here at least for a while", Kilduff told CNBC's " this week. There was, however, also news of rising production from Libya.

Global demand for oil is forecast to grow by 1.3 million barrels a day, the same as the year before. Crude oil last settled as low as $55 in November, and closed above $63 in Friday's trading. OPEC said its December oil production rose by 42,000 barrels a day to 32.42 million.

The group said this was "driven by mostly higher growth expectations for the United States and Canada", and "Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil", OPEC acknowledged.

Brent crude futures were at $61.47 per barrel at 0106 GMT, down 74 cents, or 1.2 percent from their last close.

Declining Venezuelan production cut OPEC crude output to 32.23 million b/d in December, and declines are accelerating in Venezuela, which posted the world's biggest unplanned crude output decline in 2017, according to the report.

Amid the morass of mixed messages, only one thing is certain: "This year promises to be a record-setting one for the USA", according to the IEA. Non-OPEC nations will be producing just short of 60 million bpd this year.

Latest News