Crude Oil Price Eyes China Slowdown, IMF Growth Outlook Update

Lease Operator Jon Pearson checks well pressure on a lease owned by Parsley Energy in the Permian Basin near Midland

Production in the USA will rise by 1.3 million barrels a day this year, the IEA said.

In the US, crude production climbed by 200,000 barrels a day last week to 11.9 million, the highest level in weekly figures compiled by the Energy Information Administration since 1983. The other key uncertainties about oil prices will be the impact of the US sanctions on Iran when the waivers end in early May, as well as the production in Venezuela, which has been steadily falling over the past two years.

Brent crude oil futures surged a year ago - despite abundant global stockpiles - on speculation that Saudi Arabia wanted an oil price of US$80 a barrel for its since-deferred stock exchange listing of state oil giant Aramco.

"The impact of higher oil prices in 2018 is fading, which will help offset lower economic growth", the Paris-based IEA said in its monthly report.

In the United States, energy companies cut the number of rigs drilling for oil by 21 in the week to January 18, taking the count down to 852, the lowest since May 2018, energy services firm Baker Hughes said on Friday. "The oil industry can not afford to relapse into another downturn", he said in reference to a 2014-2016 oil market slump.

"We have seen prices fall very significantly since the peak at the beginning of October, and that is providing some relief to consumers", Neil Atkinson, head of the IEA's oil industry and markets division, said in a Bloomberg television interview on Friday. The bank now expects Brent to average $61 a barrel this year, down from a previous estimate of $69, and US crude to average $54, against a prior forecast of $60.

Iran registered the third-largest decline in output, also involuntary, as USA sanctions that started in November discouraged companies from buying its oil. Production may decline by about 350,000 barrels a day on average in 2019, they said, adding that a drop of double that is a "real possibility".

A Bloomberg report showed China offered to go on a buying spree of USA goods, which investors saw as an attempt to draw closer to a trade deal with Washington.

"By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia", CNBC cited the statement as saying. Prices got another boost later, on expectations that United States sanctions on Iran would cut supplies to major importers including China, India and Japan.

EIA forecasts global oil demand to grow by 1.5 million b/d in 2019 and in 2020, with China as the leading contributor in both years.

OPEC along with other producers including Russian Federation agreed past year to output cuts effective January 1 to avert a glut. Longs rose 1.8 percent, while shorts fell 10 percent.

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