Oil trades near five-week high as IEA, OPEC boost projections for global consumption

Oil traded near a five-week high after the International Energy Agency and OPEC boosted their forecasts for crude demand.

Futures were steady in New York after rising 3.8 percent in the previous three sessions. Global demand will climb this year by the most since 2015, the IEA said Wednesday. OPEC on Tuesday raised estimates for the amount of crude it will need to supply in 2018 on stronger consumption from Europe and China. U.S. oil output gained last week as operations returned after Hurricane Harvey.

Oil in New York has fallen about 8 percent this year as the effort to drain a global glut by the Organization of Petroleum Exporting Countries and partners including Russia is stifled by increasing output from the U.S. to Libya. OPEC and its allies are discussing extending supply cuts past the end of March by more than three months, according to people familiar with the matter.

The IEA report “was taken as confirmation of the prevalent supply-tightening narrative, that that oil surplus is slowly disappearing,” said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. Still, crude is “trading at the upper end of a fundamentally justified price range” and the “upcoming seasonal demand soft patch is set to create near-term headwinds.

West Texas Intermediate for October delivery was unchanged on the New York Mercantile Exchange at 9:58 a.m. in London. Total volume traded was about 27 percent below the 100-day average. Prices rose $1.07 to $49.30 on Wednesday, the highest close since Aug. 9.

Brent for November settlement slid 7 cents to $55.09 a barrel on the London-based ICE Futures Europe exchange. On Wednesday, prices added 89 cents, or 1.6 percent, to settle at $55.16, the highest since April 17. The global benchmark crude traded at a premium of $5.37 to November WTI.

The IEA increased its estimate for demand growth in 2017 by 100,000 barrels a day to 1.6 million a day, or 1.7 percent, according to its monthly report. The re-balancing of oversupplied world markets is continuing, the agency said.

Report courtesy Bloomberg