"Another variable to watch will be USA crude oil production".
In addition to the OPEC and non-OPEC production cuts of 1.8 million barrels per day (bpd) that are due to last until the end of 2018, oil prices have found support from eight consecutive weeks of USA crude inventory drops.
Analysts, had expected a much smaller drawdown of 3.89 million barrels in crude oil. "But market participants could also use the sharp drop in production as an excuse to buy", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany. "Supply disruptions and falling U.S. and global inventories have driven crude oil higher", said Ole Hansen, head of commodity strategy at Saxo Bank in a note.
The West Texas Intermediate (WTI) was trading up 2.33 percent at 63.17 US dollars Tuesday afternoon. The session high for the global benchmark was US$69.37, highest since May 2015.
Traders following the trend line pushed the price of oil close to $70 per barrel early Wednesday following signs of a massive drain on USA oil inventories.More news: MSNBC's Chris Matthews apologizes for Cosby comment
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Much of the production growth will be concentrated in the Permian Basin, the largest USA oilfield stretching across Texas and New Mexico, said John Staub, the EIA director of the office of petroleum, natural gas and biofuels analysis. Also, the dollar fell in a broad sell-off after a report that China was ready to slow or halt its US treasury purchases.
"When it comes to hedge fund buying in general the commodities trade is front-and-center and that momentum is building for oil", said Rob Thummel, portfolio manager at energy investment manager Tortoise in Leawood, Kansas. This year also started with the OPEC vs. shale tug-of-war, although in the first two weeks of 2018, geopolitical risks and declining inventories trumped concerns over the rise in US shale, and supported oil prices and sent Brent briefly breaking above $70 a barrel on Thursday.
The rally has brought out some concerns that the market could overheat, especially as USA production is expected to rise to new records.
OPEC crude oil production is forecast to increase by 0.2 MMBPD in 2018, partially reflecting the Energy Information Administration's expectation of Libya maintaining relatively high production levels achieved near the end of 2017, according to EIA's just-released Short-Term Energy Outlook (STEO).
Only Russia and Saudi Arabia have produced more crude, hitting peak output of over 11 million bpd and about 10.7 million bpd respectively in recent years.