Despite receiving support for its bullish upward drive, rising U.S. oil production is likely to be a drag for oil’d 2018 outlook.
On Tuesday, oil prices posted their strongest ever opening since 2014, with the anti-government uprising in Iran along with the supply cuts by OPEC and Russia supporting the upward movement of oil prices.
As of 0423 GMT, U.S. West Texas Intermediate (WTI) crude futures CLc1 was up by 19 cents to $60.61 a barrel, its highest since June 2015.
The international benchmark for Brent crude futures LCOc1, was also up by 25 cents at $67.12 a barrel.
The development marks the first time since January 2014 that the two crude oil benchmarks opened the year above $60 per barrel.
“Growing unrest in Iran set the table for a bullish start to 2018,” said Schork Report, a U.S.-based firm, in a note to clients on Tuesday.
The anti-government demonstrations in Iran, in defiance, of a warning by the government that it will crackdown strongly on protesters, has extended for a fourth day.
Even without this unrest in Iran, a major oil exporter, the market sentiment remains bullish.
“Falling inventories globally and strong economic growth offset the restart of the Forties pipeline and the resumption of production following a pipeline outage in Libya,” said Jeffrey Halley, senior market analyst at Oanda, a Singapore-based futures brokerage firm.
Following an unplanned shutdown of Forties pipeline system in the North Sea, the 450,000 barrels per day (bpd) capacity of the pipeline returned to full operation on December 30.
Strong demand for crude worldwide, especially from China, has helped support the price of crude.
“We would not be surprised to see a further (oil price) rise,” said Sukrit Vijayakar, director of Trifecta, an energy consultancy.
However rising U.S. production, which is on the verge of a breaking through the 10 million bpd threshhold, is holding back crude’s outlook in 2018.
“The higher prices are expected to stoke U.S. shale output,” said O‘Loughlin.
Incidentally, U.S. oil production has seen a rise of nearly 16% since mid-2016 to 9.75 million bpd as of December 31, 2017.