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Oil Prices Make Small Gains as EIA Raises US Crude Output Outlook

March 7, 2017 at 18:11 by Andrew Moran

Oil prices are making small gains on Tuesday as traders begin to sift through the latest US Energy Information Administration (EIA) data. Investors are searching for clearer direction from a wide array of sources, including inventory data, comments from oil officials, and Organization of Petroleum Exporting Countries (OPEC) news reports.

April West Texas Intermediate (WTI) crude futures rose $0.12, or 0.23%, to $53.32 per barrel at 16:43 GMT on Tuesday on the New York Mercantile Exchange. US crude prices have been steadily rising after flirting with three-week lows last week.

Brent, the international benchmark for oil prices, is also making tiny gains. May Brent crude futures climbed $0.02, or 0.04%, to $56.03 a barrel on London’s ICE Futures exchange.

Both benchmarks have been trading in both positive and negative territory since the beginning of Asian trading. They have also been trading in a $3 band for the past month, which has been disappointing traders as many expected international oil prices to spike after the oil output freeze by OPEC members.

EIA published its short-term March outlook on Tuesday and raised its 2017 and 2018 forecasts for US crude output. The US government agency projects US output at 9.21 million barrels per day (bpd) this year and 9.73 million bpd next year.

The EIA will publish data on domestic supplies on Wednesday. Many experts expect an increase of 1.6 million barrels in crude stockpiles for the week ending March 3.

This comes as the International Energy Agency (IEA) prognosticated in a new report that US shale output would grow at about 1.4 million bpd by 2022. IEA officials note that US shale production would surge even if prices stayed at around $60, adding that US shale growth could spike by three million bpd by 2022 if oil prices reached $80.

Dr. Fatih Birol, the IEA’s Executive Director, said in the report:

We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go. But this is no time for complacency. We [do not] see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon.

Bullish sentiment over oil has declined immensely this month. With Russia’s disappointing participation in the cuts, OPEC nations raising their crude exports in February, and increasing shale production, many are not expecting a massive run akin to 2016.

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