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Oil prices sink as United States stock market slumps and dollar strengthens

Oil prices sink as United States stock market slumps and dollar strengthens

Oil rose on Thursday after a survey showed OPEC's commitment to its supply cuts remains in place, even as USA production topped 10 million barrels per day (bpd) for the first time since 1970.

A new floating production storage and offloading vessel (FPSO) arrived in Nigeria this week, adding 200,000 barrels per day to offshore output capacity.

Even Goldman Sachs is seeing what the Energy Report has been writing for months and that is that the global oil market is in a deficit situation. "Crude oil imports are down 20 percent from 2006 and today we are competing with the Middle East in the export market".

In 2008, the United States was producing about 5 million barrels of oil a day, making it dependent of foreign imports.

Crude has remained above $60 a barrel since late December, boosted by shrinking USA stockpiles and a weaker dollar, extending an advance from June amid OPEC-led output cuts to clear a glut.

Much of USA production from shale formation has been in light or ultralight sweet crudes, while the vast majority of OPEC's production cuts have come from heavier, sourer grades. After increasing relatively steadily since 2011, tight oil production began to decline after the West Texas Intermediate (WTI) crude oil price decreased from $105 per barrel (b) in June 2014 to a low of $30/b in February 2016.

Oil is becoming more expensive, despite recent data from the U.S. Energy Department on the growth of reserves and production in the country over the past week.

Just two days after President Trump proclaimed the end of thefederal government's war on energy produced in the USA, the Department of Energy's Energy Information Administration announced domestic crude oil production has reached record levels.

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Crude oil prices rebounded Thursday amid signs that OPEC is complying with supply quotas.

Texas' November production of 3.9 million barrels a day accounted for almost 40 percent of USA output.

Brent futures, the global benchmark, were up 24 cents, or 0.3 percent, at $69.89 a barrel by 0635 GMT. The investment bank said Brent likely will average $75 a barrel over the next three months, up from an earlier forecast of $62. This also presents a quandary for OPEC and countries who derive a vast portion of their economic activity from fossil fuels: There's a new major supplier in the market, and price controls from OPEC grow weaker as U.S. production continues to scale-higher.

"There's no doubt shale players will respond to higher prices", says Jan Edelmann, commodity analyst at HSH Nordbank AG.

The record-level production comes as President Trump has promised to usher in an era of "energy dominance" that will include ramping up oil-and-gas drilling across the country. On Wednesday, the EIA released its weekly production and supplies report for January 26.

Inventories are reported with a two-month lag, so by the time they have reached the five-year average, OPEC may be late to react.

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