U.S. Crude Output Hits Fresh High, Raising Doubts About OPEC Exit Plan

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OPEC said Wednesday that it doesn't see oil markets balancing until late next year as shale drilling heats up, throwing into doubt recent talk of plotting an exit strategy from its production cuts.

[ibd-display-video id=2354661 width=50 float=left autostart=true] In its monthly report, OPEC now sees 2018 non-OPEC supply growth of 990,000 barrels per day up by 120,000 bpd from its prior report. Most of the production growth is expected from U.S. shale producers, and OPEC sees 2018 U.S. production growth of 1.05 million bpd, up 180,000 from its last estimate.

U.S. crude production rose to a record 9.780 million barrels per day from 9.707 million in the prior week, the Energy Information Administration said Wednesday. U.S. crude inventories fell by 5.1 million barrels last week, the EIA said, but gasoline supplies swelled by 5.7 million barrels. Analysts polled by S&P Global Platts expected a 4 million-barrel drop and a 1.6 million-barrel increase in gasoline stockpiles. Late Tuesday, American Petroleum Institute, an industry group, reported a 7.4 million barrel drop in crude stockpiles and a 2.3 million barrel increase in gasoline supplies.

OPEC said its production fell by 133,500 barrels a day last month to 32.45 million barrels a day.

Brent futures fell 1.4% to $62.44 per barrel. U.S. crude edged 1% lower to settle at $56.06 a barrel. Crude futures are still near two-year highs, drawing in more shale activity, with producers hedging prices.

Exxon Mobil ( XOM ) shares closed up 0.4% on the stock market today . Chevron ( CVX ) rose 0.2%, BP[ ticker symb=BP] ended flat, and Royal Dutch Shell (RDSA) added 0.7%.

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The OPEC report comes after the cartel, Russia and other top non-OPEC producers agreed last month to extend their production cuts to remove 1.8 million bpd from the global market to the end of 2018.

After the meeting on Nov. 30, members were bullish that the global supply glut was easing and were confident that any gain by U.S. shale would be manageable.

Some members have recently hinted at establishing an exit strategy in the spring. Kuwait's oil minister, Issam Almarzooq suggested that members will discuss an exit strategy at the biannual meeting in June, according to Bloomberg .


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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