Despite the rising production, oil prices traded higher on Tuesday, with US crude touching its highest since December 2014. The EIA expects global inventories to increase by 300,000 b/d in 2019.
There are several reasons why oil markets have tightened. Brent in London traded around $US68.55 per barrel, a new 2 ½-year high.
Giovanni Staunovo, a commodity analyst for UBS, told UPI there were a variety of factors apart from Trump's decision that were pulling oil prices into negative territory.
Production from the Permian is expected to be 3.6 million bpd by the end of 2019, an increase of roughly 900,000 bpd from December 2017, and 32 percent of USA crude oil production in 2019.
The EIA said United States crude oil production averaged an estimated 9.3 million barrels a day in 2017 and is estimated to have averaged 9.9 million b/d in December. EIAs January Short-Term Energy Outlook forecasts Brent to average $60/b in 2018 and $61/b in 2019. These levels of US crude oil output are expected to continue increasing in 2019 to an average of 10.8 million b/d.
Meanwhile, US production is showing signs of levelling after after huge shale oil output in the past two years.
A market surplus driven by US shale oil and a previous strategy by the Organization of Petroleum Exporting Countries to defend a market share with robust production levels meant there was plenty of room for risk.
Most of the growth in USA output will come from the Permian basin, a huge shale region spanning western Texas and New Mexico. The EIA anticipates OPEC production to increase by 500,000 b/d in 2019 as it slowly returns to pre-agreement levels.
Most of the remaining growth will come from offshore wells in the federal waters of the Gulf of Mexico, with seven new projects expected to come online by the end of 2019, the agency said.
The rally in oil prices, which are up 59 percent since 2017 lows reached in June, has been driven by a number of forces, including increased demand and continued production cuts. While India's oil demand may have disappointed by its 2017 demand growth-which was the slowest pace in four years-it was due to a fuel tax the government imposed to slow growth to a modest 2.3%. Non-OECD consumption growth is expected to account for 1.2 million b/d and 1.3 million b/d of the growth in 2018 and 2019, respectively. In both 2018 and 2019, EIA expects total global production to be slightly greater than global consumption, with USA production increasing faster than production in any other country, contributing to modestinventory builds.
The national average price this summer should peak in August at $2.63.