Oil Prices Set to Rally as US Consumption Rebounds, Saudi Shipments Fall
13 July, 2017, 01:31 | Author: Gladys Mathis
The Short-Term Energy Outlook released this week said average benchmark worldwide crude oil, known as Brent crude, is forecast to average $50.79 per barrel this year and $51.58 per barrel in 2018, down 3.6% and 7.2%, respectively, from last month's forecast.
First, let's look at crude oil prices.
Oil ended higher on Tuesday, rising about 1.4%, as a lower 2018 forecast on USA crude production and speculation of possible output curbs in Libya and Nigeria fueled the strongest session gain for prices in over a week.
August WTI crude oil futures settled at $45.04, up $0.64 or +1.44% and September Brent crude oil futures closed at $47.52, up $0.64 or +1.37%.
OPEC is struggling to build momentum for a multilateral effort to balance the market through managed production declines.
The number of rigs in operation has more doubled from May 2016.
"There is strong demand for our crude but we are sticking to our OPEC commitments", Reuters quoted its source as saying. Official inventory data from the Energy Information Administration is due at 1430 GMT (3.30 p.m. BST).
"We (OPEC) are fairly in consensus on our position on cuts", he said, adding that OPEC hoped oil prices would stabilize later this month.
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The last three years have seen the oil market in a state of oversupply, despite OPEC-led countries reducinged their output in 2016 and the extended it into this year. Goldman went as far as saying that oil prices could fall below $40 if the market doesn't get a clear catalyst to buy.
Weekly US gasoline demand data "compares favourably to the five-year average and miles driven also continue to grow year-on-year", Bank of America Merrill Lynch said in a note to clients.
Commercial crude stockpiles fell to 495 million barrels, EIA said.
Gasoline futures gained 0.25 cent, or 0.2%, to $1.5208 a gallon, the 10th gain in 12 sessions. Unless there was a persistent downtrend in oil rig count and production, it would be premature to say that USA producers have felt the heat from the earlier oil price weakness, said Goldman Sachs. "The price of crude oil, which accounts for about half the retail price of gasoline, has declined in recent months on rising USA crude oil production and high petroleum inventories".
Electricity: "Forecast milder temperatures for this summer compared with last summer will reduce the need for air conditioning, resulting in the average US household consuming 5% less electricity from June through August".
Gasoline demand tends to increase in the northern hemisphere summer as USA drivers take to the road and this has helped support prices in the short term.
"Even if OPEC countries cut their production further and even if this causes prices to go up for a while, US production will come to pressure the prices once again", Birol said.
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Global benchmark Brent crude dropped more than one per cent before recovering to trade 1.73 per cent higher at $47.69 per barrel. West Texas Intermediate for August delivery rose 8 cents to US$44.48 a barrel at 9.58am on the New York Mercantile Exchange.
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