The recent strong rally in global benchmark oil futures paused last week, bringing to an end a four-week period of gains which had seen prices rise by more than 10% since December. Brent futures fell during the week by 1.8%, while WTI decreased by 1.5%. Prices, however, continue to hover around three-year highs and are well supported, in the short term at least, by underlying market fundamentals. 
The main bearish factors included the slow but continuous rise of US domestic crude oil production and potential stronger contributions by other non-Opec producers such as Canada and Brazil. This led to some profit taking, coupled with concerns about over-bullish futures positions for US crude, the build in US gasoline stocks, the decline in US refinery runs and a firm US rig count.
A tightening market underscored by a healthy demand and restricted supply represented the bullish trends. US crude oil and distillate stocks also continued to decline, adding further support to an already tight market.
Finally, a statement by Russia’s energy minister highlighting his concern that the market is not completely rebalanced, and a perception that the market continues to be vulnerable to various geopolitical risks added to the bullish outlook.
According to the US Energy Information Administration, US crude oil inventories fell for the 9th straight week, declining to 6.9mn barrels (mbs) in the week to 12 January. This represented a three-year low and was below the five-year average of about 420mn barrels.
US Distillate stocks also fell by 3.9 mbs, while gasoline stocks rose by 3.6 mbs. US crude production rose again last week to reach 9.75 mbpd.
BHGE data also showed that the US oil rig count declined by five to 747 in the week to 19 January, to about the same level it was in early September 2017. 
Latest Opec and IEA oil market reports both highlight the growth in non-Opec oil supply in 2018, pointing to the threats that this conveys to Opec’s effort to rebalance the market. In addition, the US Energy Information Administration has said that US unconventional shale oil output is expected to rise next month to 6.55mn bpd.
BHGE rig data shows that the number of active rigs in the Permian basin increased by six to 409, which is expected to boost oil output from the Permian to a record high of about 2.9mn bpd by February, or about 30% of the total US oil production. 
However, according to a recent Reuters survey, some analysts question the sustainability of the US shale oil production growth, particularly if prices were to soften once more, with some believing that shale oil production may have already peaked. Others disagree.
Even though crude oil futures retreated last week, oil prices are finding robust support from a tightening market, with strong fundamentals. Most analysts are betting that oil prices will remain well-supported and so the market is not expecting steep or early declines. Other analysts, however, consider that there is only limited further upside for oil prices because some non-Opec producers are taking advantage of the firmer price to increase their output.