Crude oil and other liquids inventories grew by 2.0 million barrels per day in the fourth quarter of 2016, the US Energy Information Administration (EIA) estimates in its global oil forecast published on Wednesday, stating that oil prices should remain below US$60 through the end of 2018.
The global crude oil and liquids inventory build was driven by an increase in production and a significant, but seasonal, drop in consumption, the EIA said.
Oil prices had been under pressure after the American Petroleum Institute (API) released its bearish inventory data on Tuesday, in anticipation of the official EIA data.
The API data showed crude, gasoline and distillate stockpiles rising more than expected.
Although the U.S. is currently increasing production, the EIA says global crude oil markets are expected to tighten through 2018.
“Global production and consumption are both projected to increase through 2018, but consumption is expected to increase at a faster rate than production,” the EIA said.
The production increase in the fourth quarter of 2016 largely reflects members of the OPEC ramping up production in advance of implementing the agreement on production cuts.
Global production is expected to have increased by 1.6 million barrels per day in the fourth quarter of 2016, with OPEC accounting for 0.9 million barrels per day, or 55 percent of this increase, the EIA said.
The EIA estimates that total global production averaged 96.4 million barrels per day in 2016. Global production is expected to increase to 97.5 million barrels per day in 2017 to 98.9 million barrels per day in 2018.
Given annual inventory builds, “along with a lack of a significant draw on existing inventories, prices remain below $60/b through the end of 2018,” according to the EIA report.
For 2017, the EIA expects Brent crude spot prices to remain flat because of an uptick in U.S. shale oil production. The agency expects prices to average about US$53 per barrel this year, slowly increasing in 2018 but averaging about US$56 per barrel for the year.