A surge in U.S. oil exports is expected to finally make a dent in the country’s stubbornly large crude oil inventory, a reputed factor in crude prices that have stayed persistently below or just above $US50 a barrel, Reuters reports.
“Oil traders and analysts are expecting large volumes of crude to draw from storage tanks across the United States in coming weeks,” the news agency writes, “in what would be the most tangible sign of an inventory overhang reduction that has punished prices over the last two years.”
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Rising oil production from hydro-fracked shale deposits has largely offset the efforts of the Organization of the Petroleum Exporting Countries and several non-OPEC countries, including Russia, to push prices higher by curtailing their own production—a strategy recently extended for another nine months.
One reason for the drawdown in stocks: the United States is now shipping increasing volumes of oil abroad. “U.S. production sits now at 9.3 million barrels a day,” Reuters writes, citing the U.S. Energy Information Agency. “However, U.S. exports of crude and products remain strong, with some 10 million barrels of U.S. crude en route to Asia, according to shipping data and trade sources.”
That new market, and this week’s Memorial Day inauguration of the traditional summer driving season, may help U.S. crude inventories fall below the psychologically significant 500-million-barrel level “over the next six to eight weeks, or eight to 10 to be conservative,” Connecticut commodities researcher Andrew Lebow told Reuters.
However, that may not do much for OPEC’s hopes of reviving global crude prices, another analyst warned. “I expect any curtailment of OPEC exports will be matched by further increases in U.S. shale production, as evidenced by the continued increase of drilling rigs and permits,” said Josh Sherman, a partner at Houston consulting firm, Opportune LLP.