Oil extends slide as record USA output sparks supply glut fears

Oil extends slide as record USA output sparks supply glut fears

China was the top oil importing country in the world past year as it brings more refining capacity online and fills strategic inventories, while domestic oil production continues to decline. The meeting ended with signing an agreement to reduce oil production by a total of 558,000 barrels per day starting from January 2017.

Also last week, oil production in the United States through the development of shale has increased to 9.91 million barrels per day, which was the highest value since the beginning of the 1970s and approached to the production figures in Russian Federation and Saudi Arabia.

The pipeline, which Swiss-based INEOS bought in late October for $250 million from BP, carries around 450,000 barrels per day of Forties crude oil.

That is largely due to soaring United States shale oil production, which has jumped by nearly 18 percent since mid-2016 to 10 million barrels per day (bpd), surpassing top exporter Saudi Arabia.

Bit by bit, the U.S. petroleum industry is turning world oil markets inside out. However, Energy Information Association stated that the WTI crude would average at around $58 per barrel this year while the Brent benchmark is expected to average $62.39 per barrel in 2018.

Brent futures LCOc1 fell $2.02 a barrel, or 3.1 percent, to $62.79 a barrel, its lowest settlement since December 13.

USA crude plunged to a seven-week low at $58.07 a barrel, before paring losses to end Friday's session down $1.95, or 3.2 percent, at $59.20.

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Futures fell as much as 1.1 percent in NY after the Energy Information Administration said American crude in storage tanks and terminals increased by 1.9 million barrels last week. Gasoline and diesel stockpiles also expanded.

Crude imports fell by 538,000 bpd to 7.89 million bpd for the week ending February 2, and commercial crude stocks slightly rose 1.9 million bpd to 420.3 million, the EIA data said. Also, oil is inversely correlated with the dollar, which has strengthened as equities markets slid. The political mayhem involving the royals of Saudi Arabia in November of previous year led to a steep rally in crude-oil prices. 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.

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.

Production is expected to average 11.04 million bpd in the fourth quarter of this year. Since then, prices have been oscillating in a tight $10 band, between $45-55 per barrel for more than a year, before breaking out last November to settle at around $65 in January of this year. Stock indexes from Japan to Germany tumbled on Tuesday after a frantic sell-off in USA shares sent the Dow Jones Industrial Average to its biggest loss in 6 1/2 years.

It is possible that fears of a repetition of the dynamics observed at the end of 2014 may return to the markets, as investors turn their focus to such reports in effort to discern whether a new wave of global inventory growth is on the horizon.

The remarkable comeback of USA crude production earned yet more press on Wednesday with the disclosure from that country's Energy Information Agency that America will export more energy products than it imports by 2022, a status it hasn't achieved since 1953 and wasn't expected to achieve until 2026.

As China continues to increase oil imports, more oil producers will be vying to raise their share of the world's top crude oil import market.

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