As oil hits $70, warning lights flash up in Asia

A gas station attendant pumps fuel into a customer's car at PetroChina's petrol station in Beijing

A gas station attendant pumps fuel into a customer's car at PetroChina's petrol station in Beijing

USA crude production fell in the most recent week by almost 300,000 barrels per day to about 9.5 million bpd, which analysts attributed to the deep freeze across most of the country.

Prices came off highs after an early surge that took benchmarks past key resistance levels that produced a flurry of buying in an active day in the market.

Also impacting prices is an increase in Asian demand for crude oil and petroleum products.

The agency attributed most of the recent run-up in price to continuing draws on global inventory levels, and it estimates that global petroleum and other liquid fuels inventories fell an average of 400,000 barrels per day last year, “the first year of annual average draws since 2013.”. Analysts said that could have been the result of extreme cold temperatures across the United States.

According to trade press reporting and tanker tracking data, importing diluent for blending with its heavy oil is becoming increasingly hard for Venezuela.

Yet, another of the bearish signals is rising US oil production, which is threatening to derail OPEC's and Russia's efforts to tighten supplies.

Taking advantage of their competitive prices, US crude oil exports are rising, including to faraway Asia.

The rally has brought out some concerns that the market could overheat, especially as US production is expected to rise to new records. A year ago was the lowest annual average price since 2009 and still pales in comparison to the average of $3.37/gal that USA consumers were paying as recently as 2014.

On Tuesday, the EIA boosted output expectations, saying it now sees overall production at record highs, surpassing 11 million barrels per day (bpd) by 2019. By many estimates US production is set to take off this year - which is concerning for many other producer nations.

Eagle Ford production is expected to be from 1.2 million bpd to 1.3 million bpd this year and next, which EIA said is slightly above the 2017 level. Demand is expected to climb an additional 340,000 bpd in 2019 to 20.65 million bpd, the agency said.

"Inventories ended 2017 9.3 percent above the five-year average, a stark contrast to the 35.6 percent surplus seen at the end of 2016", Oil Futures Editor Geoffrey Craig said in a statement emailed to UPI. EIA said if the 6.9 bcf increase is achieved in 2018, it would be the highest on record. The average sale price of gas in 2017 was $2.42/gal.

The U.S. exports natural gas by pipeline to Mexico and imports by pipeline from Canada, with imports averaging 8.2 bcf per day in 2017. USA gasoline stocks rose 4.1 million barrels, EIA data showed, more than expected, while Singapore average refinery profit margins have fallen below $6 per barrel this month, their lowest seasonal level in five years.

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