India to seek lower oil rates from Saudi Arabia, US

India to seek lower oil rates from Saudi Arabia, US

On Wednesday, the U.S. Energy Information Administration (EIA) said crude production last week rose to a record high of 10.25 million barrels per day (bpd). American crude production has now eclipsed Saudi Arabia's output, and Citigroup Inc. expects it to breach 11 million barrels a day by the end of summer, several months earlier than the US government's own forecast.

Meanwhile, U.S. crude oil imports have been lower than 8.5 million bpd in each month since 2013 when the shale revolution was in its first period of expansion, compared to more than 10 million bpd in monthly imports in numerous years of the 2000s.

The agency forecast USA crude oil output will rise by 1.26 million bpd to 10.59 million bpd in 2018.

Global benchmark Brent crude was down 2.6 percent to $65.44 at 1140 EST (1640GMT), while American benchmark West Texas Intermediate fell to $61.62 - a 3.5 percent loss. Most importantly, perhaps, the report showed that production exceeded 10 million barrels a day for the first time. Also, oil is inversely correlated with the dollar, which has strengthened as equities markets slid. Distillate product supplied averaged 4.2 million barrels a day for the past four weeks, up by 8.9% compared with the same period previous year. Stock indexes from Japan to Germany tumbled on Tuesday after a frantic sell-off in USA shares sent the Dow Jones Industrial Average to its biggest loss in 6 1/2 years.

The futures market is in backwardation where prompt oil prices exceed those for future delivery 0#CL: , suggesting investors expect demand to outpace supply. Most of the crude-oil contracts traded globally are priced in U.S. dollars.

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Chinese consumption of oil meanwhile is rising, as reflected by the surge to a record 9.57 million bpd in imports in January, according to official customs data.

A shipment of American oil to the Middle East is the latest sign of how the shale boom and the lifting of a ban on U.S. exports has changed the flow of petroleum around the world. "The market is going to try to determine if the crude draw offsets the distillate build heading into tomorrow's EIA report", said Phil Flynn, analyst at Price Futures Group.

"Goldman Sachs was the latest to give up its skepticism and predict that Brent would reach $80 a barrel within six months.

Thus a real pain-trade has not yet hit the oil market", said Bjarne Schieldrop, head of commodity strategy.

Oil prices fell for the fifth session in a row Thursday on the back of surging US production and rising inventories. "We're still trading around those levels, but need to wait and see what the United States markets will do".

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