Oil price continued its fall for a fifth day as surging US output and a rising dollar sent crude to its biggest drop in two months.
Despite recent forecasts that crude prices are headed for a significant correction because traders have oversold the commodity, at least one notable investor says it will continue to gain value.
EIA data also showed that USA crude production also rose to 10.25 million bpd last week, which would be a record if matched by monthly figures.
China's crude oil imports have also increased because of higher refinery runs and expanding refinery capacity.
At 10.25 million bpd, US output is now higher than the previous 10.044 million bpd record from back in 1970, topping Saudi Arabia and within reach of Russia's. Now, the EIA expects production to hit the 11 million bpd mark later this year, reaching an average 11.2 million in 2019.
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World oil prices fell back suddenly over the last few trading sessions. USA producers, by contrast, export on the basis of freight costs and price spreads between United States and other kinds of crude oil. Now American oil has flowed to the Middle East, and more specifically the UAE.
Brent crude spiked briefly yesterday on news of the pipeline's halt.
I mean, we are planning this year at $55 to $60. But they have given up just about all of those gains as swirling fears have bled from the stock market to commodities as and as investors have focused on the unrelenting rise in USA production. Shale players and OPEC could lose their production discipline and a strengthening USA economy could cause the dollar to strengthen again and dampen oil prices.
Oil prices have also been supported by a 1.8 million barrels per day (bpd) cut in supply by the Organization of the Petroleum Exporting Countries and Russian Federation.
We will remind, the worldwide energy Agency warned that the United States is prepared "explosive" growth of oil production. "The ability of crude oil inventories to rise in the face of a snap back higher in refinery utilization was particularly bearish", said John Kilduff, partner at energy hedge fund Again Capital LLC in NY. Global benchmark Brent crude fell 84 cents to $66.03 a barrel. The catalyst behind the selling pressure is Iran's plan to boost production and record USA crude output.
The U.S. has planned to sell half of its emergency oil reserves to help pay its bills, which was the hedge against supply disruptions.