Opec on Tuesday forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its production-cutting deal with non-member countries is helping to tackle a supply glut that has weighed on prices.
In a monthly report, the Organisation of the Petroleum Exporting Countries said the world would need 32.83 million barrels per day (bpd) of Opec crude next year, up 410,000 bpd from its previous forecast.
Opec said inventories were falling and that an increase in the price of Brent crude for immediate delivery to a premium to that for later supplies, known as backwardation, raised hopes that a long-awaited rebalancing of the market is under way.
“This is due to the shooting up of demand for prompt-loading barrels and amid increasing sentiment that the oil market will rebalance over the next year with a major drawdown in crude and product stocks,” Opec said in the report.
“This first stirring of backwardation since oil prices were above $100 a barrel is seen as a sign of tightening supplies and strong demand.” Oil added gains after the report was released, trading above $54 per barrel. Prices are still less than half their levels in mid-2014.
In a deal aimed to clear the supply glut, Opec is curbing output by about 1.2 million bpd, while Russia and other non-Opec producers are cutting by half as much, until March 2018.
Ministers are now discussing extending the pact by at least three months.
Opec in the report also said its oil output in August came in below the demand forecast as output fell by 79,000 bpd from July to 32.76 million bpd.
The figures mean Opec’s compliance with its output-cutting pledge stands at 83 per cent, according to a Reuters calculation, down from 86 per cent initially reported for July but still high by Opec standards.
Oil edges up
Oil prices recouped some losses on Tuesday, helped by Opec saying its output fell in August, an indication that the production-cutting pact was helping to reduce a supply gut. International benchmark Brent crude edged 30 cents higher to $54.14 per barrel by 1235 GMT. Earlier in the day it traded as low as $53.42. US West Texas Intermediate (WTI) was flat from the previous close at $48.07 a barrel. It had traded down to $47.73.
In its monthly report the Opec said the two hurricanes that have hit the United States in recent weeks would have a “negligible” impact on demand.
The market is assessing Hurricane Irma’s effect on demand, even as refinery restarts in the wake of Hurricane Harvey boosted crude oil consumption expectations.