Crude Flat on Concerns of Rampant U.S. Output as Ghana, Iraq, and Nigeria Plan to Boost Production Capacity

by Ship & Bunker News Team
Thursday January 18, 2018

A slight drop in crude prices on Thursday reportedly due to market fears of increased supply from the U.S. caused observers to predict that oil has now reached the limit of its upside; and if other countries preparing for increased production are any indication, market losses stemming from swelling stockpiles could become the norm later this year.

West Texas Intermediate dropped 2 cents to to $63.95 and Brent dropped 7 cents to $69.31 per barrel, with the minuscule losses attributed to Energy Information Administration data showing that U.S. crude inventories fell 6.9 million barrels last week, compared with forecasts of 3.5 million.

Although crude is just below its highest price since December of 2014, Fawad Razaqzada, market analyst at Forex.com, pointed out that "The upside is now limited for oil prices: U.S. oil producers will ramp up production in the coming months."

Also focused on U.S. shale is the Organization of the Petroleum Exporting Countries (OPEC), which in its monthly report released on Thursday stated, "Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil."

While the concern over rampant U.S. production further compromising prices - and mitigating the positive effect of the OPEC-led production cuts - is not without merit, the Americans are hardly alone in taking advantage of a now-robust market and preparing to pump all-out.

Ghana signed a deal with Exxon Mobile Corp on Thursday for offshore deepwater exploration, expected to commence later this year; it's the first deal to be signed after the International Tribunal for the Law of the Sea last September favoured Ghana in an ocean boundary dispute with the Ivory Coast.

Also on Thursday, Iraq announced it will sign a deal with BP to double production capacity from the northern Kirkuk oilfields to more than 700,000 barrels per day; Iraq will start trucking crude from Kirkuk to Iran at the end of this month.

And despite recent threats by militants to disrupt production, Nigeria is focused on the long term and Thursday saw the signing of a deal between Shoreline Group, an international oil trader, and local lenders that will see $530 million in financing going towards doubling the producer's output.

The numerous indications that 2018 will be a year of vigorous production from a variety of sources will put to the test the assertions of many OPEC boosters, including its new president the United Arab Emirates, that the cartel will remain committed to its production cuts instead of backing out prematurely in order to discourage rival supply.