USA supply growth to dominate 2018 oil markets, outstrip Saudi Arabia - IEA

Oil prices finished lower Friday night on worries over growing rising U.S. oil production. Rival suppliers would be handed the entire 1.3 million barrel-a-day expansion in the global oil market this year, and USA crude output could overtake that of Saudi Arabia and even get close to Russia, IEA data show. Despite the cuts, the rig count in 2017 and early this year remains much higher than in 2016, resulting in a 16-percent rise in USA crude oil production since mid-2016, to 9.75 million barrels per day (bpd).

Despite a plunge in US commercial crude inventories, oil prices slipped to settle at $63.95 a barrel in NY, down 2 cents, as traders resurrected an old, but persistent concern that increasingly efficient shale drillers will ramp up output and overwhelm OPEC's efforts to curb production.

On 30 November past year it was announced that the oil price cut agreement would be extended until the end of 2018 in an effort to support oil prices.

Today's falls could lead to the biggest weekly price decline since October, according to Reuters. Some did fold or put production on hold but recent highs mean that shale companies are going back online.

"What we are trying to understand is the responsiveness of the United States shale producers".

The upshot? Unless there is a serious supply disruption, $65 a barrel is a "natural ceiling" for the oil price, he reckons.

But the forecast was balanced by figures in the report showing OPEC's compliance with the supply cuts remained high in December and a further sharp slide in Venezuelan oil output.

"Very soon USA crude production may overtake that of Saudi Arabia and also rival Russia's", it said.

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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.

Having said that, however, "some digestion of the recent gains should not be alarming, as the rally did overheat slightly at the turn of the year", they said.

The United States is expected to take over Saudi Arabia and even rival Russian Federation as the world's leading energy producer, the International Energy Agency said on Friday.

U.S. West Texas Intermediate and international-benchmark Brent crude oil funds are trading lower early Friday amid concerns over rising U.S. production.

But lurking in the background is rising non-OPEC production - which was acknowledged last week by the producer group.

USA crude inventories were estimated to have fallen 3.5 million barrels in the week ended January 12, according to a Reuters poll. However, Total products supplied over the last four-week period averaged 20.5 million barrels per day, up by 5.6 percent from the same period of past year.

OPEC's compliance with the cuts averaged 95% throughout 2017, according to the IEA report.

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