Oil Reverses Lower As US Crude Production Hits 10 Million Barrels

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Record Chinese crude imports in January of 9.57 million bpd also supported prices, traders said. American crude in storage tanks and terminals increased by 1.9 million barrels last week as refiners shut or limited operations to conduct seasonal maintenance.

Data from the United States government last week showed that output climbed above 10 million barrels per day in November for the first time since 1970, as shale drillers expanded operations after gains in oil prices a year ago.

The EIA also forecast that USA output will average 10.6 million bpd this year, enough to continue surpassing Saudi Arabian output.

United States energy exports now compete with Middle East oil for buyers in Asia.

The current crude price action makes fundamental sense, as supply is dwindling with OPEC oil production control in place. Liquids production in China fell by 2 percent annually to 4.8 million bpd last year and is further expected to drop this year and next.

The relative performance of the S&P energy index has generally tracked oil prices, but a gap emerged in 2017 as crude prices recovered but shares in energy companies lagged, indicating they are primed to catch up. Last month, it forecast a 970,000 bpd year-over-year increase to 10.27 million bpd.

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For 2019, it slightly raised its production growth forecast to an increase of 590,000 bpd to 11.18 million bpd.

Russian Federation surpassed Saudi Arabia as China's largest source of foreign crude oil in 2016, exporting 1.2 million b/d to China in 2017 compared with Saudi Arabia's 1.0 million b/d.

Brent futures have lost around 8 per cent in value since reaching a four-year high above $71 in late January, and investors in crude are still sitting on one of the largest bullish positions in history. Over those five years, Russian Federation and Brazil significantly boosted their market shares on the Chinese market, with Russia's rising to 14 percent from 9 percent, and Brazil's imports went to 5 percent from 2 percent.

US crude inventories likely saw a build for the second consecutive week, while distillate stockpiles were forecast to have fallen last week, an extended Reuters poll showed on Tuesday. It's the fourth-largest OPEC producer's first cargo of USA oil, according to EIA data. The purchases of USA oil aren't likely to continue, given the U.A.E.'s own supply, Lipow said.

Oil fell for a fifth day as surging US output and a rising dollar sent crude to its biggest drop in two months.

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