Rising crude oil production, led by surging U.S. output, is likely to top demand this year, providing less support for commodity prices and harkening back to the early days of the unconventional boom, the International Energy Agency (IEA) said Tuesday.

The IEA’s “Oil Market Report,” issued every month, said new and revised data show a “modest” tightening early this year in the worldwide oil balance. However, the “main message remains unchanged from last month and it is very clear,” that increasing oil output from countries not members of the Organization of the Petroleum Exporting Countries (OPEC) is stronger than demand.

“Most importantly, the underlying oil market fundamentals in the early part of 2018 look less supportive for prices,” IEA researchers said.

The world’s energy watchdog said demand growth estimates remain strong at 1.6 million b/d. Last year’s demand growth, in parallel with a modest uptick in non-OPEC output and reductions by leading exploration and production (E&P) companies, contributed to an “extraordinarily rapid fall” in oil stocks from countries within the OECD, i.e., the Organisation for Economic Co-operation and Development.

“Although the OECD is not the whole world, the leading oil producers who agreed to cut output identified the level of the group’s stocks as an indicator of the progress of their initiative,” IEA noted. As the surplus shrunk dramatically, the success of OPEC’s agreement to reduce overall production may be close at hand.

Still, the window for higher oil prices may be closing quickly. IEA’s supply/demand balance indicates that in the early part of this year, oil stocks also may decline. The big stumbling block to balancing the supply/demand equation is deja vu, all pointing back to the tremendous success by E&Ps in the onshore.

“The main factor is U.S. oil production,” IEA researchers said. “In just three months to November, crude output increased by a colossal 846,000 b/d, and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.”

In fact, the U.S. Energy Information Administration earlier this month reported that domestic crude oil production reached 10.038 million b/d in November, the highest level since a record 10.044 million b/d achieved in November 1970.

All of the indicators that point to a continuing surge from U.S. basins are in “perfect alignment,” according to IEA. Increasing prices lead, after a few months, to more drilling, more completions, more production and more hedging.

“In early 2018, the situation is reminiscent of the first wave of U.S. shale growth that, riding the tide of high oil prices in the early years of this decade, made big gains in terms of market share and eventually in 2014 forced a historic change of policy by leading producers,” researchers noted.

Having reduced their operating costs dramatically, U.S. E&Ps “are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth.”

The U.S. onshore output figures are sobering for E&Ps not working in domestic basins that may have had to shut in capacity and again face challenges to their market share, said researchers.

“Another sobering thought is that it is not just a matter of production: trade patterns are changing,” they said.

For example, a condensate shipment recently sailed from the United States to the United Arab Emirates.

“Such a development would have seemed incredible a few years ago; now it looks like the shape of things to come,” IEA said.

Meanwhile, the oil market is dynamic and things could change quickly. Notably, the deteriorating situation in Venezuela, a major oil producer, could lead to market imbalances. A buoyant global economy also could lead to higher demand growth.

“As a result, prices could be maintained at recent levels even as U.S. production rises,” IEA researchers said. “If so, most producers will be happy, but if not, history might be repeating itself.”