A surprise drawdown in crude stockpiles and escalating tensions between the United States and China resulted in increased oil prices on Thursday.
The US West Texas Intermediate (WTI) crude for May delivery rose $0.19 or 0.3 percent at $63.56 a barrel after settling down at $0.14. Front-month London Brent crude for June was up $0.20 or 0.3 percent at $68.22 a barrel; having ended down at $0.10.
According to the data released by Energy Information Administration (EIA), WTI and Brent had hit two-week low, after China imposed a wide range of tariffs for over 128 US exports.
The data also showed that US crude inventories fell by 4.6 million barrels last week, compared to the analysts’ expected draw of 4.1 million barrels. For the previous week, the EIA had reported a 1.6-million barrel build in crude oil inventories.
The oil got support from global equities, as the United States expressed willingness to negotiate a resolution on trade after the country proposed tariffs on $50 billion Chinese goods.
US Crude Oil Productions Increase
According to the EIA, crude oil production in the US is heading toward another record in this year.
On Wednesday, EIA’s data showed that US’ oil production rose by 5% in 2017 to 9.3 barrels per day (bpd). This was led by Texas’ production averaging 3.5 bpd. Its crude oil production was more than two and a half times of the total crude production of the US.
Furthermore, the EIA said that the country’s oil production has increased significantly over the past ten years, driven mainly by production from tight rock formations using horizontal drilling and hydraulic fracturing.
Growth in the Permian region, which spans parts of Texas and New Mexico, also contributed to a 74,000 bpd production increase in New Mexico. As a result, it surpassed California and Alaska to become the third largest crude oil producing state in 2017.
Projects and expansions started in 2016 contributed to Federal Gulf of Mexico’s annual growth of 51,000 barrels per day. In 2017, it was the second largest oil-producing region. Also, in year 2017, production in Colorado, Oklahoma, and North Dakota grew by more than 30,000 from the previous year.
All in all, the United States’ oil production would likely continue to grow. Baker Hughes’ report of a lower rig count may result on varying oil prices; but the fluctuations on the count won’t affect a lot due to the country’s high productivity at the moment.
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