Higher crude output from the United States should limit any upside to global oil prices through the end of 2018, the U.S. government said on Tuesday, ahead of a meeting of major oil producers later this month to discuss extending supply cuts, Reuters reported.
U.S. crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the U.S. Energy Information Administration said.
It expects total output for 2018 to rise to nearly 10 million bpd, with most of that coming from the increase to the 2017 forecasts. Higher output in non-OPEC countries, particularly the United States, Canada and Brazil, has offset OPEC's deal reached last year to cut production and kept pressure on oil prices.
The Organization of the Petroleum Exporting Countries and non-OPEC member countries will meet in Vienna on May 25 to discuss whether to continue output cuts of 1.8 million bpd in an effort to reduce a global crude glut and support prices.
The OPEC deal reached in November helped lift prices but also breathed new life into U.S. producers, who have boosted drilling in shale regions and raised U.S. output to levels not seen since mid-2015.
"Higher oil production from the United States, along with rising oil output from Canada and Brazil, is expected to curb upward pressure on global oil prices through the end of 2018,” said EIA Acting Administrator Howard Gruenspecht in a statement.
Last month the EIA forecast a 350,000 bpd year-over-year increase, according to its monthly short-term energy outlook.
For 2018, the EIA's growth forecast is 650,000 bpd, down from its previous forecast of 680,000 bpd. Its forecast for total output in 2018 rose to 9.96 million bpd from 9.90 million bpd.
The United States, Canada and Brazil were not among countries who agreed to cut supply, but analysts warned that growth in those regions could continue to undermine efforts to lift prices. Shale production was set to rise to 5.19 million bpd by May, according to the EIA.
"It's pretty apparent that any sustained rise back above $55 will get more and more shale online," said John Kilduff, a partner at energy hedge fund Again Capital LLC in New York.
"Also, we should start to see Dakota Access pipeline and other infrastructure improvements liberate more and more U.S. barrels. We have only just started to see the real rebound in shale," he said.
Mounting fears of continued oversupply last week caused oil prices to fall to levels not seen since November, before the OPEC deal.
Top oil exporter Saudi Arabia said on Monday that it would "do whatever it takes" to rebalance a market that has been dogged by oversupply for more than two years.
The EIA forecast U.S. oil demand for 2017 to rise 290,000 bpd, up from its previous forecast for a 250,000 bpd increase. For 2018, oil demand is expected to increase by 300,000 bpd, down from a previously forecast rise of 340,000 bpd.
(Reporting by Catherine Ngai; Editing by David Gregorio and Meredith Mazzilli)
