Texas shale challenges North Sea crude as world oil benchmark

Brent Crude

The Permian Basin of Texas and New Mexico, the engine room for shale production and acquisitions since the oil-price crash, is expected to comprise nearly 30% of output this year. This news overshadowed a government report earlier in the week which showed USA production at a 50 week high. The dollar index, which measures the greenback against six major peers, decreased 0.38 percent to 89.047 at 3:00 p.m. (2000 GMT).

Yesterday, Goldman Sachs, which has been bullish on oil for some time released a statement arguing that crude oil could reach more than $82 a barrel in the coming week.

In the fourth quarter of 2017, Goldman estimates that the oil market was in a sizable supply deficit, on the order of about 1.1 million barrels per day.

Brent for April delivery traded up 52 cents at United States dollars 69.41 a barrel at 11:45 a.m.in London after earlier rising to USD 69.67.

Sure enough, the boost to prices from OPEC's strategy has invigorated US output, which surged to a 47-year high of 10 million barrels a day in November. WTI prices were about $60 a barrel in January 2018. Increased adherence to the OPEC production cut program is now underpinning the market.

US crude, meanwhile, is flowing into global markets.

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Global oil demand rose by 1.6-million barrels per day (bpd), or about 1.5%, last year and UBS said it should grow by another 1.3-million this year or even more after the International Monetary Fund (IMF) raised its global economic growth forecast.

"The bulk of the Caribbean storage facilities have always been used for transshipment", particularly for building bulk, which would be of interest to USA crude exporters, Houston-based Kurt Barrow, an analyst at IHS Markit, said by phone.

Output by OPEC also rose in January from an eight-month low as higher output from Nigeria and Saudi Arabia offset a further decline in Venezuela, a Media survey found.

The Energy Department said Thursday that average crude production reached 10.038 million barrels a day in November, just below the record of 10.044 million barrels a day set in November 1970.

Iranian officials said the Iranian nuclear deal signed in 2015 and that led to the lifting of restrictions on Iran's crude oil exports is absolutely not renegotiable. The Permian Basin alone accounted for about one-fourth of the nation's oil production.

As a result, US consumers should expect higher gasoline prices. Russian data showed strong compliance with output cuts, even as production hit 10.95 million bpd. It forecast that oil will return 24 percent to investors over the next six months.

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