As Baby Boomers faced persistent gas shortages in the 1970s from interruptions in Middle Eastern oil exports due to conflicts such as the Yom Kippur War or the Iranian Revolution, they certainly weren’t thinking about a little industrial process called shale oil extraction paving the way for the U.S to become one of the top oil producers in the world with capabilities of producing more than 10 million barrels per day and exporting up to 1.7 million barrels of crude per day. This new record of oil production will be short-lived as the U.S. government is forecasting a climb to 11 million barrels a day by late 2019 rivaling Russia, the world’s top producer. U.S. energy exports now compete with Middle East oil for buyers in Asia. As of 1:20pm EST, WTI is feeling the effects of records being broken and is down $0.41 at $63.89, HO is down $0.0160 at $2.0690, and RBOB is down $0.0015 at $1.8480.
With strong demand growth, high OPEC compliance accelerating, and banks such as Goldman Sachs and Morgan Stanley reiterating the oil market is likely to remain undersupplied, keeping backwardation intact, this rally that has been driven by robust fundamentals is here to stay, for now. In the meantime, we await APIs and DOEs, each postponed a day due to the MLK holiday, for any other hints in regard to supply and demand in the energy sector.