Oil prices up on strong demand
Oil prices rose slightly on Tuesday on strong demand for crude, an expected drop in US crude stocks and the extension of OPEC’s supply cut agreement.
By 1:41 p.m. EST, Benchmark Brent had risen 46 cents $62.91/barrel and US WTI was up 24 cents to $57.71/barrel. The Canadian Crude Index rose to $40.10.
“Demand remains firm which is the main reason for us to still see oil at above $60 per barrel,” Georgi Slavov, head of research at Marex Spectron told Reuters.
Rising crude demand in 2017 has buoyed OPEC’s efforts to cut the glut of crude and Reuters reports US crude stocks data to be released Tuesday and Wednesday is expected to show another drop in inventories.
Analysts expect data from the American Petroleum Institute and the US Energy Information Administration to show a decline in crude stocks by 3.4 million barrels.
Reuters’ analysts looking ahead to 2018 believe the market will tighten slightly. Morgan Stanley analysts said in a note that they expect demand to outpace supply next year. The US financial services firm says most of the growth in production is expected to come from the US and Canada.
As well, Goldman Sachs raised its forecast for 2018 Brent and WTI to $62 and $57.50/barrel, respectively, mostly due to OPEC’s supply agreement.
OPEC along with non-cartel participants in the pact agreed last week to extend the agreement to cut a combined 1.8 million barrels per day (b/d) to the end of 2018.
Reuters reports in November, OPEC output fell by 300,000 b/d to its lowest since May.
But many are concerned that rising US production will kneecap OPEC’s efforts. Last week, EIA data showed US crude output was up to nearly 9.5 million b/d, nearing the 9.63 million b/d seen in 2015.
“US output will play the most significant role on the supply front in 2018,” Tamas Varga of oil broker PVM told Reuters.
“A jump above $60 in WTI could easily push U.S. production over the 10 million b/d mark, increasing the non-OPEC forecast and capping further attempts to push prices higher.”
