Oil rises as IEA forecast overshadows United States crude build

Speaking to reporters after the meeting, Zanganeh said their talks mainly focused on Iran-Venezuela cooperation and the current conditions surrounding the global crude market. The IEA said a global oil surplus was beginning to shrink due to stronger-than-expected European and United States demand growth, as well as production declines in OPEC and non-OPEC countries.

IEA says OPEC production is still a source of concern.

OPEC raised its forecasts for global oil demand growth in 2017 and 2018, saying consumption would rise by 1.35 million bpd next year, 70,000 bpd more than previously thought.

Neil Atkinson, head of the oil industry and markets division for the IEA, told CNBC that "pretty robust" demand indicates that a rebalancing of the market is "underway". Non-Opec supplies fell by more than 500,000 b/d to 58m b/d, but it is still more than 1m b/d higher than a year ago with growth dominated by the US, Kazakhstan, Russia, Canada and Brazil. Texas, where Harvey made landfall, represents 31% of all USA refinery capacity, based on data from January 2017. Over the last month, crude oil imports averaged about 7.6 million barrels per day, 7.4% below the same month previous year.

Output decreased by 210,000 b/d to nearly 32.7m b/d in August.

The OECD commercial stocks surplus over the five-year average dropped to 190mn bbl in July, compared to more than 219mn bbl above the five-year average as of the end of June.

There are signs the global oil market is returning to balance and stocks of oil products in industrialised nations could soon fall below their five-year average, the IEA said Wednesday.

The IEA said prices will find further support.

"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly".

However OPEC may be like the dog chasing the vehicle, not sure what it would do if it ever caught it: if prices do rise with any real significance as a result of the cartel's actions, it will be American shale producers, not petrostates, that will be quickest to pounce.

As well, weekly data from the USA government's Energy Information Administration (EIA) revealed a smaller-than-expected rise in crude supplies, a hefty drop in gasoline (petrol) stockpiles and a jump in domestic output as production in the Gulf of Mexico and along the Texas coast around Houston recovered in the wake of Hurricane Harvey.

For a long time the gulf coast has been a production and refining centre, but today it is an important global trading hub with more than 4m b/d of refined products and 800,000 b/d of crude oil being exported.

It recommended that the U.S. strengthens its energy security to address events, such as hurricanes, by potentially adding products to government-held inventories.

  • Anthony Vega