After a rough week on the global stock markets, commodities saw a decline, and the dollar strengthened. One of the main industrial indexes, the Dow Jones Industrial Average fell more than 600 points, only the ninth time in history that a fall of that magnitude has occurred.
In early trading on Friday, Brent crude was priced above US$64 with WTI still holding above US$60 a barrel.
What's also important is that these high output levels are achieved more efficiently when comparing with production in 2014. Both figures are up 3.1% from its prior outlook.
The market is nervous as it watches the upward trend of United States production. "Once the weekly EIA data showed crude output assessments at 10.25 million barrels a day, selling pressure started to mount in earnest", the analysts wrote in a daily note Thursday.
Omega Advisors cited Nabors and independent USA drillers WPX Energy, Parsley Energy, and Hess as some of the companies that will benefit the most from the higher oil prices. New refinery capacity and strategic inventory stockpiling combined with declining domestic oil production were the major factors contributing to the recent increase in China's crude oil imports.
The 1.2-1.8 million-barrels-per-day cut in output, which was enforced from January 2017 in response to a sharp fall in crude-oil prices that hovered around $40 per barrel in late November, had some effect in driving prices higher.
The concerted production cuts by OPEC and friends have added strength to the market in the past year, but this in turn gave U.S. producers a green light to restart production. "The ability of crude oil inventories to rise in the face of a snap back higher in refinery utilization was particularly bearish", said John Kilduff, partner at energy hedge fund Again Capital LLC in NY. "Everybody is itching to produce more oil", said John Kilduff, partner at energy hedge fund Again Capital LLC in NY.
"For the Saudis, given their low cost structure, additional barrels at anywhere near these prices must surely be tempting in terms of additions to government revenues, and would be aimed at thwarting other higher-cost shale producers taking market share", wrote CIBC economists in a report on oil prices this week.
The market has been pressured by the weak stock market. China sourced 56 percent of crude oil imports from OPEC countries, 14 percent from Russian Federation, and 4 percent from Brazil. S&P Global Platts' analyst expected a 2.8-million-barrel increase.
Hedge funds have cut their bullish exposure to petroleum for the first time in six weeks as oil prices stalled and sentiment turned more cautious amid concerns about an increasingly crowded trade.
Only Russia produces more, averaging 10.98 million bpd in 2017.
This is believed to be the second time in recent months that the United States has sold oil to Abu Dhabi.
The UAE also has ambitions of hiking its production capabilities to 3.5 million b/d from around 3 million b/d later this year.
USA producers are pumping more oil after cuts by major producers, a weak dollar and geopolitical threats to supply sent crude prices roughly 50% higher in the second half of 2017.