US Crude Losses Offset by News It Will Be a Net Energy Exporter Four Years Sooner Than Expected

Wednesday February 7, 2018

The remarkable comeback of U.S. 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.

The news came as oil prices fell for a fourth straight session, with West Texas Intermediate settling down $1.60 to $61.79 and Brent falling $1.35 to $65.61 per barrel; the declines were attributed to the EIA's other disclosures that U.S. inventories rose by 1.9 million barrels to 420.3 million in the week through February 2, and that production hit a fresh record high of 10.25 million barrels per day (bpd) last week.

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

But if the bears were spooked by figures that potentially contribute to the mitigation of the Organization of the Petroleum Exporting Countries' (OPEC) efforts to bring about global market supply and demand rebalance, the EIA appears enthused by its latest findings: "The United States energy system continues to undergo an incredible transformation," Linda Capuano, the agency's administrator said in a statement.

She added, "This is most obvious when one considers that the [Annual Energy Outlook] shows the United States becoming a net exporter of energy during the projection period in the Reference case and in most of the sensitivity cases as well — a very different set of expectations than we imagined even five or ten years ago."

Despite recent forecasts that crude prices are headed for a significant correction because traders have oversold the commodity, at least one notable investor says it will continue to gain value.

Leon Cooperman, the chairman and CEO of Omega Advisors who predicted WTI's rise to $60 per barrel while it was still trading around the $49 mark, on Wednesday told CNBC that "I think the supply-demand outlook is favorable, and we would not be surprised to see oil reaching $70 a barrel."

Omega Advisors cited Nabors and independent U.S. drillers WPX Energy, Parsley Energy, and Hess as some of the companies that will benefit the most from the higher oil prices.

Still, Wednesday's losses seem to support the argument that fickle traders have embarked on a path that may see crude lose much of the gains it has earned so far in 2018: earlier this week Brian LaRose,technical analyst at United-ICAP, remarked, "We're definitely starting to raise some serious red flags, especially in the $67 area for Brent; if we can get a bounce off that area, that would suggest to us we have the possibility to work higher, but it would suggest the sideways consolidation period could continue."