Global oil glut to continue shrinking, as prices rise: OPEC

"Given Venezuela's astonishing debt and deteriorating oil network, it is possible that declines this year will be even steeper than the 270,000 barrels a day in 2017", the report said.

With the sharp increases in domestic production, the USA may see itself as the world's top oil producer going into 2020. West Texas Intermediate, the US benchmark for the price of oil, was down 0.16 percent to $63.87 per barrel. The February contract expires at Monday's settlement. Brent, the global benchmark, lost 70 cents, or 1%, to $68.61 a barrel.

In a report issued by the company, KAMCO attributed the increase in oil prices to the current turmoil gripping OPEC powerhouse Venezuela and the decline in United States oil reserves.

WTI is now trading at $63.2 per barrel and Brent at $5.5 per barrel premium to WTI. In the second quarter there will be a stronger build-up of oil stocks, including in the USA when consumption is declining.

"This year promises to be a record-setting one for the US", it said.

The share of Saudi Arabia's exports of refined oil products steadily rose throughout 2017, offsetting a drop in overseas crude oil sales as the kingdom complied with a global supply pact, the International Energy Agency said.

Despite increased costs, OPEC cited a JPMorgan report that found US shale exploration and production companies could achieve "decent rates of return" at $60 per barrel even if costs rose by another 15%.

Oil prices have been gaining on tighter global supplies, amid efforts by the Organization of the Petroleum Exporting Countries, along with producers including Russian Federation, to cut output and drain global stocks.

According to the National Bureau of Statistics, it's the first time annual growth has improved in seven years. Production was limited until the end of 2018 and showed an "unprecedented alliance between the world's top two oil producers".

"As we approach the re-balancing by the end of 2018, we need to extend the framework but not necessarily in the production levels", Al-Falih said. "Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico".

Opec expects demand for its crude to stand at this year, at 33.1 m b/d - a figure that was downwardly revised from the prior month's report.

Earlier, OPEC reported that there is an increase in oil production by the cartel countries by 42,000 barrels, to 32.42 million barrels.

Oil production in the surging this year, surpassing the production capacity of Saudi Arabia and coming close to that of Russia, CNBC reports.

Total non-Opec supply is forecast at 58.8 million b/d this year.

In the United States, crude inventories fell 6.9 million barrels in the week to January 12, to 412.65 million barrels.

Rising U.S. crude could dent a rally that has pushed oil up by 50% since June 2017 lows, in large part because of the belief that the glut in supply was easing.

  • Wendy Palmer