SINGAPORE: Oil prices largely reversed earlier falls on Thursday as a North Sea pipeline outage and record Chinese imports countered US crude production soaring past 10 million barrels per day.
Brent crude futures were at $65.51 per barrel at 0721 GMT, flat from their last close and up from a 2018-low of $65.12 a barrel reached early in the session.
US West Texas Intermediate (WTI) crude futures were at $61.73 a barrel. That was down 3 cents from their last settlement, but a recovery from a session-low of $61.33 a barrel.
Support on Thursday came from the second outage in as many months on the 450,000 bpd Forties pipeline network, Britain’s biggest, which supplies much of the crude underpinning Brent futures, although operator Ineos said it would likely restart the pipeline by Thursday.
Record Chinese crude imports in January of 9.57 million bpd also supported prices, traders said.
Looming over markets, however, was US production soaring past 10 million bpd last week, to 10.25 million bpd.
“US crude production should keep hitting new highs throughout 2018,” US bank Citi said after the data’s release.
Until the early 2000s, the US was oil starved, importing a peak of 12 million bpd.
But in one of the steepest rises of any oil producer in modern history, US output has surged by more than 20 percent since mid-2016, undermining OPEC’s and Russia’s efforts to tighten the market and prop up prices by withholding production.
At 10.25 million bpd, US output is now higher than the previous 10.044 million bpd record from back in 1970.
It’s above that of top exporter Saudi Arabia’s and within reach of Russia’s.
“What surprised the most was the large spike in oil production to 10.25 million barrels per day which was significantly higher than 9.92 million from the previous week,” said Fawad Razaqzada, market analyst at futures brokerage Forex.com.
“Clearly, the data points to an imbalanced market and oil prices have responded by turning sharply lower,” he added.
Weighing further on prices, US commercial crude stocks rose by 1.9 million barrels in the week to Feb. 2, to 420.25 million barrels.
The US Energy Information Administration (EIA) this week also upped its 2018 average output forecast to 10.59 million bpd, up by a whopping 320,000 bpd from its last forecast just a week earlier.