The direction of the crude oil market today will be determined by three key factors: the U.S. Dollar, U.S. equity prices and the U.S. Energy Information Administration's inventories number. WTI hit a low of $61.33, the lowest since January 5.
The US government forecasts that the nation's production will climb to 11 million barrels a day by late 2019, a level that would rival Russian Federation, the world's top producer. By end of trade on Monday, Brent crude had come down to $67.62 per barrel from $69.65 on February 1.
For its part, OPEC remains concerned about the level of production by USA shale producers and the cartel is urging its US rivals to pare output to support prices.
Total gasoline inventories increased by 3.4 million barrels last week, according to the EIA, and are now in the middle of the five-year average range.
Hedge funds and other speculators had a record long position in crude futures as recently as late January.
The costs of labor and contracted services have recently risen sharply in the most active oilfields; drillable land prices have soared; and some shale financiers are calling on producers to focus on improving short-term returns rather than expanding drilling.
While the market is still digesting the STEO projections, the impact from EIA's weekly inventory could still be significant due to the size of the build. Gasoline figures are also bound to affect prices. China imported on average 8.4 million bpd in 2017, compared with 7.9 million bpd of imports for the United States. Shipments from US ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, traveling as far as China and the United Kingdom. "We believe the sentiment cycle has finally turned and see more near-term downside for oil prices", says top Julius Bear commodity analyst Norbert Ruecker. Statoil ASA beat analysts' profit expectations in the fourth quarter as Norway's biggest oil producer managed to take advantage of crude's recovery to a larger extent than many of its bigger rivals.
A further recovery in the US stock market will also help underpin crude oil because it will indicate increased demand for higher risk assets. However, front-month contracts fell further on Wednesday than further-dated futures, suggesting the EIA data dented that bullish view.