The US West Texas Intermediate (WTI) crude futures CLc1 were at $63.38 a barrel, down 57 cents from their last settlement. WTI marked a December-2014 peak of $64.89 a barrel on Tuesday.
The International Energy Agency (IEA), in its monthly report, said that global oil stocks have tightened substantially, aided by OPEC cuts, demand growth and Venezuelan production hitting near 30-year lows.
But it warned that rapidly increasing production in the United States could threaten market balancing.
“Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico,” the IEA said of 2018 production.
US crude oil production C-OUT-T-EIA stood at 9.75 million barrels per day (bpd) on Jan. 12, data from the Energy Information Administration showed. The IEA said it expects this to soon exceed 10 million bpd, overtaking OPEC behemoth Saudi Arabia and rivaling Russia.
Analysts also pointed to an expected demand slowdown at the end of winter in the northern hemisphere and excessive long positions in financial oil markets as a likely brake on any upward momentum in prices.
ANZ bank said, “an upcoming soft patch in demand and extreme investor positioning does open up the possibility of some short-term weakness”.
Overall, however, oil prices remain well supported, and most analysts do not expect steep declines.
The main price driver has been a production cut by a group of major oil producers around the Organization of the Petroleum Exporting Countries (OPEC) and Russia, who started to withhold output in January last year.
The supply cuts by OPEC and its allies, which are scheduled to last throughout 2018, were aimed at tightening the market to prop up prices.
In the United States, crude inventories fell 6.9 million barrels in the week to Jan. 12, to 412.65 million barrels.
That’s their lowest seasonal level in three years and below the five-year average marker around 420 million barrels.