US crude oil futures for January had climbed to $97.70 a barrel by mid-afternoon in New York, representing a rise of 1.2%, boosted by a number of reports showing increased activity in the US manufacturing sector.
Markit’s flash reading for December manufacturing PMI came in at a level of 54.4, indicating expansionary activity, while November industrial production advanced 1.1%, driven by utilities output, comfortably exceeding the 0.5% that had been forecast by a Reuters poll of economists.
Industrial production is a procyclical indicator, moving in step historically with the business cycle, and demonstrating a close correlation with economic activity. A sharp rise in industrial production bodes well for fourth-quarter GDP, therefore, and suggests demand for oil in the US, the world’s largest oil consumer, should remain robust.
Demand will have to remain strong in order to keep up with rising supply: the Energy Information Administration, the statistical division of the US Energy Department, revealed today that it had upwardly revised its annual output forecasts. The EIA now predicts that US oil production will rise by 800,000 barrels per day annually to a peak of 9.5 million in 2016, close to 1970’s record output of 9.6 million barrels per day.
Advancements in recovery techniques have led to a shale oil boom in the US, reducing the country’s reliance on imported oil. The EIA sees OPEC’s share of world oil production dropping below 40% before 2016, when it is forecast to pick up again.