Divergent Views on 2018 Oil Supply, Demand Growth

The three most closely watched market forecasters have divergent market outlooks for this year in their most recent monthly reports, with the US Energy Information Administration forecasting 2018 to see record US crude production along with a sharp rise in global demand growth.

The International Energy Agency, however, adopted a cautionary tone, warning that the second wave of US shale growth could overwhelm OPEC production cuts and catch oil producers that are "currently sitting on shut-in production capacity" unaware, Platts reported.

"All the indicators that suggest continued fast growth in the US are in perfect alignment: rising prices leading, after a few months, to more drilling, more completions, more production and more hedging," it said in its recent report.

The EIA, in its Short-Term Energy Outlook, was the most bullish of the three for demand growth, forecasting an increase of 1.73 million barrels per day in 2018 over the 2017 levels. OPEC and IEA saw growth of 1.6 million bpd and 1.4 million bpd, respectively.

OPEC's demand forecast for its own crude in 2018 sees a rise of 10,000 bpd on the year, in contrast to falls of 500,000 bpd and 74,000 bpd seen respectively by IEA and EIA.

But in the past few months, the producer group has been lowering the demand forecast for its own crude in 2018, conceding that far more non-OPEC crude would be supplied to the market this year than previously expected.

EIA had the largest forecast for non-OPEC supply growth in 2018, seeing a rise of 2.35 million bpd. OPEC's report suggested an increase of 1.4 million bpd, while IEA was between the two, with a forecast of a 1.7 million bpd gain.

The EIA expects US oil production to average 10.59 million bpd in 2018, which would mark as the highest-ever annual average US crude production, surpassing the previous record of 9.6 million bpd set in 1970.

All three saw OPEC crude output little changed in January from a month earlier. EIA saw growth of 0.09 million bpd, OPEC 0.08 million bpd and the IEA said output was flat on the month.