By Henning Gloystein
SINGAPORE (Reuters) – Oil prices reversed earlier falls on Friday, lifted by OPEC’s ongoing supply cuts and hopes that Washington and Beijing may soon end their trade dispute.
Despite this, prices remained below 2019 peaks reached earlier this week as U.S. crude oil production hit a record 12 million barrels per day (bpd) and its exports also surged.
International Brent crude futures were at $67.15 per barrel at 0707 GMT, 8 cents above their last close, but below $67.38 per barrel reached earlier this week.
U.S. West Texas Intermediate (WTI) crude oil futures were at $57.06 per barrel, up 10 cents, but below this week’s $57.55 per barrel 2019 high.
Traders said prices were lifted from earlier drops by hopes that Washington and Beijing could resolve their trade disputes, which have dented global economic growth, before a March 1 deadline, during negotiations this week.
Prices have also been supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
OPEC and some non-affiliated producers such as Russia agreed late last year to cut output by 1.2 million bpd to prevent a large supply overhang from growing.
Goldman Sachs said in a note it expects OPEC output to average 31.1 million bpd in 2019, down from 31.9 million bpd.
At least in part offsetting that is surging U.S. crude oil production, which reached 12 million bpd for the first time last week, the Energy Information Administration (EIA) said on Thursday.
That means U.S. crude output has soared by almost 2.5 million bpd since the start of 2018, and by a whopping 5 million bpd since 2013. America is the only country to ever reach 12 million bpd of production.
(GRAPHIC: U.S. oil production – https://tmsnrt.rs/2VecTrj)
As output surges, U.S. oil stocks are also rising.
U.S. commercial crude oil inventories rose by 3.7 million barrels to 454.5 million barrels in the week ended Feb. 15, the EIA said.
Analysts say U.S. output will rise further and that oil firms will export more oil to sell off surplus stocks.
“We see total U.S. crude production hitting 13 million bpd by year-end, with 2019 averaging 12.5 million bpd,” U.S. bank Citi said following the release of the EIA report.
Of that, the bank said, “we could be seeing some weeks with
4.6 million bpd of gross crude exports by end-year, adding to this week’s new record” of 3.6 million bpd.
With U.S. supply surging, Goldman Sachs said it expected non-OPEC supply to grow by 1.9 million bpd this year, more than offsetting the OPEC cuts.
That means much will depend on demand, which Goldman said it expected to grow by 1.4 million bpd this year.
Given the supply and demand picture, Goldman said “we expect $60-$65 per barrel Brent prices, on average, in 2019 and 2020.”
(GRAPHIC: U.S. commercial crude oil inventories – https://tmsnrt.rs/2TXJSjb)
(Reporting by Henning Gloystein; Editing by Joseph Radford and Tom Hogue)