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The International Energy Agency predicted Friday that the U.S. will surpass Saudi Arabia in crude output this year and will challenge Russia as the world's top producer on the back of "explosive" growth in shale production.

Why it matters: While the report is consistent with existing production forecasts, it nonetheless starkly underscores how the U.S. has upended global markets in recent years.

"Relentless growth should see the US hit historic highs above 1o [million barrels per day], overtaking Saudi Arabia and rivalling Russia during the course of 2018 – provided OPEC/non-OPEC restraints remain in place," IEA says in its latest monthly oil market report.

"Expect a volatile year": The IEA report predicts that 2018 could be a turbulent year in oil markets, thanks to geopolitical risks and questions about continued compliance with the OPEC agreement.

  • One wildcard is uncertainty over the future rate of Venezuela's ongoing collapse in oil production.
  • Plus, impact from the rising supply from the U.S., Brazil and Canada is just one of many swirling forces in the market.

By the numbers: Brent crude oil recently hit 3-year highs of around $70-per-barrel and IEA notes that "the market is clearly tightening" as crude stockpiles have fallen. But IEA says the prospects for higher prices are cloudy.

Market balance: Overall, IEA says that if the OPEC production-limiting deal with Russia and other allied producers indeed stays intact all year, the market is likely to be in balance for the year as a whole, with a modest surplus in the first half and modest deficit in the second half.

  • "This scenario, or something similar to it, presumably lies behind the assumption by forecasters surveyed by Reuters that Brent will trade in a $60-$70/bbl range in 2018," the report states.
  • "Whether or not the recent price rise has run out of steam and seventy really is plenty remains to be seen. However, such are the geopolitical uncertainties and the ever-dynamic prospects for US shale that we should expect a volatile year."

Go deeper: The Wall Street Journal has a close look at the new IEA supply and demand data here. And IEA's summary of the monthly report is here.

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