The Energy Information Administration (EIA) released another EIA Drilling Activity report that raised its estimates for shale oil production without considering the realities on the ground. According to the report, the EIA says that U.S. shale oil production will increase by 111,000 barrels a day to 6.55 million barrels a day in February next month, and that production in the Permian Basin will surge by 76,000 barrels a day.
Luckily or not, 2017 is behind us. It was a positive year for the gold market, as the yellow market gained more than 12%. However, investors are forward-looking, so let’s focus on what the coming months will bring.
Oil prices pulled back after Brent crude hit its $70 per barrel objective and Chinese crude oil imports hit a record high but was a bit shy of expectations, but still strong as global demand is surging, global supply is falling and then there is the dollar.
Oil prices have been driven higher by momentum in recent days and weeks as investors speculated about tighter market conditions amid the recent de-stocking of crude inventories, owing in part to reduced crude production from the OPEC and Russia.
The crude oil glut that many said would never go away is officially gone. For the first time since June of 2015, oil supplies are back in the average range and not above average. This is happening as U.S demand is above average and that in part explains why the supply of oil continues to drain at the fastest pace in history.
Crude oil prices traded at the highest level since OPEC declared a production war on Shale and laughed off an estimate of record U.S. oil production from the Energy Information Administration. The reason why the oil bears got it wrong was that they underestimated demand and overestimated production.