Major oil producing-countries have grown concerned that as prices remain near these levels, it will spur additional production from USA shale patches in Texas and North Dakota, risking overwhelming the market with additional supply, and hurting OPEC's market share.
US crude futures recently traded down 21 cents, or 0.33%, at $63.59 a barrel on the New York Mercantile Exchange.
The U.S. Energy Department expects production will blow through 10 million bpd in the next few months, en route to 11 million bpd by next year, rivaling Russian Federation and Saudi Arabia.Futures contracts show an expectation for prices to pull back by year end, with the December U.S. crude futures contract now trading just above $60 a barrel.
Iran has warned that the group risks overheating the market with oil at current levels.
Another factor behind the rise in prices is the devastating hurricanes along the U.S. Gulf Coast that shut down refineries and reduced stockpiles of fuels such as gasoline and diesel. "But there will be a reaction in USA shale, and OPEC's strategy will backfire massively".
According to online source Finanz, the US crude oil inventories shrank over the past week, which pushed oil prices higher.
"Brent oil will remain range bound in the Dollars 65 region until there is more clarity on the United States counter-move", it added.
Meanwhile, given the sudden rebound in the crude oil markets, USA producers, or mainly the upstart shale oil industry, has been ramping up production to capitalize on the higher prices to the dismay of OPEC and other global oil suppliers.
U.S. crude stocks drop, fuel inventories up
Crude oil prices continued to soar Wednesday, as industry data showed another surprisingly large drawdown in U.S. oil inventories.
Brent for March settlement dipped 12 cents to $69.14/bbl on the London-based ICE Futures Europe exchange after rising above the $70/bbl threshold on Thursday for the first time since 2014. Oil prices opened sharply lower today, dropping more than Rs 50 in early minutes of the trade.
EIA data also showed U.S. production fell by 290,000 barrels per day (bpd) to 9.5m bpd, likely due to a cold snap across the country.
The average volume of US product supplied for crude oil and petroleum products was 19.8 million b/d through October, the highest level since 2007.
And in addition, oil-burning power plants in New England which rarely get used all year have been running hard, contributing one-third to ISO New England's power generation fuel mix at times.
The continued drop in U.S. crude oil inventories comes as the United States continues to ramp up production, hitting the second highest production level of 2017 in the last week of December of 9.782 million bpd. In December, China's crude imports fell 9% month on month to 33.7-million tonnes, or 7.97-million bpd, customs data showed.
Reuters reports that Saudi Arabia doesn't want oil prices to grow too fast.
Q: What will become of global crude oil supply and demand in the mid- to long-term?
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