Oil Slides After EIA Forecasts US Crude Output In 2018 Will Be The Highest Since 1970

Tyler Durden's picture

Suggesting that the OPEC "production cut" gambit may soon backfire, on Tuesday the U.S. Energy Information Administration cut its 2017 world oil demand growth forecast by a fractional 10,000 barrels per day to 1.62 million bpd, and also cut its 2018 estimate by 50,000 bpd to 1.46 million bpd. At the same time, the EIA cut its U.S. crude output forecast for 2017 dractionally to 8.98mmbpd from its January  9 mmpd forecast - still 100,000 higher than 2016 - even as it aggressively boosted its 2018 US output forecast to 9.53 mmbpd from 9.30 mmbpd. If accurate, that would mark the highest US crude output since 1970, and indicate that US shale is indeed becoming a key global marginal oil producer.

"Global oil supply and demand is now expected to be largely in balance during 2017 as the gradual increase in world oil inventories that has occurred over the last few years comes to an end," said Howard Gruenspecht, acting EIA administrator, in a statement.

While the EIA also forecast WTI would average $53.46 a barrel this year, up from the previous forecast for $52.50 and Brent at $54.54 this year, up from $53.50, the market's kneejerk reaction was negative, with concerns about rising supply mounting, and as a result March West Texas Intermediate crude continued to trade lower, declining declined over 1%, to a 2-week low...

... dropping below its 50-day moving average, even as dollar gave up much of its intraday gains.

With CFTC reports showing that hedge fund net longs in crude are at all time highs, and conversely virtually all shorts have been blown out, the potential for a sharp reversal in WTI is on deck, with capitulatory selling possible should the declining trend continue. A key catalyst could be today's API inventory report due at 4:30pm which over the past few weeks has shown a substantial increase in inventory, defying OPEC's story about a market that is progressively shifting into equilibirium.

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hardmedicine's picture

wait what about peak oil!!!


SenselessPanic's picture

short covered ... wait for the rally

scv's picture

18th century technology used by descendant of apes who think its dinosaur blood

GoinFawr's picture

...including yourself, obviously. Or did you comment via Malleus Maleficarum?

“Our country demands all our strength, all our energies. To resist the powerful combination now forming against us will require every man at his place. If victorious, we will have everything to hope for in the future. If defeated, nothing will be left for us to live for.”
Robert E. Lee



bankbob's picture

Lee left out the part where Northern Armies would be turned loose on Civilians, burning homes and fields and killing cattle.  Historians have no idea how many Southerners and Freed Slaves starved to death in 1864-1866.  Many put the number over 1 million.  Some say close to 3 million.

Sherman should have been courtmartialed as a war criminal.  

silverer's picture

Another oil "Supplies!" lol

Hohum's picture

If the companies don't go bankrupt first...

gorillaonyourback's picture

Thats exactly what peak oil deniers don't  get  oil goes to 0.  It won't be energy effective to go get lololol.  Its just starting this odd oscillation that results with the price of oil arriving at 0.

TeethVillage88s's picture

Highest Output since 1970... with fewest employees.

All Employees: Mining and Logging: Oil and Gas Extraction (CEU1021100001)
Jan 2017: 177.1 Thousands of Persons, Not Seasonally Adjusted, Updated: Feb 3, 2017

bankbob's picture

One rig produces three times the output as it did just 5 years ago.  And, much of this is redrilling and refracking which means infrastructure is already built.

And, fracked wells used to drill 15 or 20 holes a mile down.  Now they drill 1 or 2 a mile down and christmas tree out in the pay zone.  And, since they are reusing water and fracking fluid - it cuts deliveries by 60%.

We are drill for more with less.  And, producing more output while causing a recession for oilfield services companies.

venturen's picture

going to suck for the world market when we go net oil exporter....probably by year end

yngso's picture

I suspect that falling demand isn't factored in fully. Deep sea resource are still being found. Those are humongous, and after the initial huge expense, getting it up doesn't cost much. Maybe supply is underestimated too. September may become veeery interesting...