DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session with solid gains after Organization of the Petroleum Exporting Countries left its global oil consumption forecast for this year unchanged but downgraded projected crude production growth outside the 12-member cartel, leading to wider supply deficit in the second half 2024.

In their Monthly Oil Market Report released Tuesday morning, OPEC economists maintained annual global oil consumption growth this year at 2.2 million bpd to reach a record level of 104.4 million bpd. Upward adjustments to the U.S. and Chinese forecast were mostly offset by downward revisions for the OECD Europe. OPEC forecasts U.S. oil consumption will climb to 20.48 million bpd this year, up 170,000 bpd or 0.8% from 2023. Total U.S. oil demand for the second and third quarters, considered to be the strongest six months for transportation fuels, is expected to reach 20.67 million bpd.

"In the OECD, ongoing improvements in airline activities, combined with robust road mobility are expected to support jet/kerosene and gasoline as the main drivers of demand growth in 2024, growing by around 200,000 bpd year-over-year, each," projected OPEC in their MOMR.

Outside industrialized nations, oil demand is forecast to see healthy growth of 2 million bpd driven by China, and supported by the Middle East, Other Asia, India, and Latin America. On the supply side, non-OPEC liquids production growth in 2024 was revised lower by 150,000 bpd from the prior month's assessment to 1.2 million bpd. Non-OPEC liquids supply growth is expected to be primarily supported by U.S. tight oil assets, oil sands expansion in Canada, and offshore projects in Latin America and the North Sea.

Citing secondary sources, OPEC's crude oil production declined 350,000 bpd or 1.3% to 26.342 million bpd in January, with big monthly declines by three of the 12 countries leading to the falloff in output. Both Iraq, down 98,000 bpd to 4.194 million bpd, and Kuwait, down 109,000 bpd to 2.434 million bpd, reduced output in line with voluntary cuts announced Nov. 30, 2023, that were atop of production cuts for all of 2024 announced June 4, 2023. Crude production by Saudi Arabia increased 25,000 bpd to 8.965 million bpd in January, with the kingdom extending a 1 million bpd voluntary reduction in output that initially took effect in July 2023. UAE production increased 31,000 bpd to 2.927 million bpd last month but holds below an agreed to output rate of 3.056 million bpd. Algerian crude output fell 46,000 bpd to 911,000 bpd in January, below an allowed production rate of 956,000 bpd. The biggest drop in crude production last month was by Libya, down 162,000 bpd to 1.015 million bpd, with the North African oil producer not included in production quotas by OPEC due to internal warring. The steep falloff in monthly oil production followed a force majeure declaration at Libya's largest oil field, Sharara, in early January.

Earlier in the session, oil complex got a boost from a Bloomberg report indicating around half of the oil tankers sanctioned by the U.S. Treasury Department for transporting Russian crude above a $60 bbl price cap since mid-October have gone idle. This might suggest that tougher sanctions enforcement by the United States and European allies could be exerting long-awaited pressure on Russian oil trade. According to a separate report, many of the Greek tanker owners that had been involved in assisting the transport of Russian crude have since left the transactions.

A coalition of G7 countries set a price cap of $60 bbl on Russian oil exports in December 2022 with the goal of reducing Moscow's revenue for its invasion of Ukraine, while keeping its oil flowing to avoid a global shortage that would stoke inflation.

Also on Tuesday, oil traders positioned ahead of weekly inventory survey released by the American Petroleum Institute, scheduled for 4:30 p.m. EST, followed by official data from the U.S. Energy Information Administration on Wednesday morning.

Consensus of analysts surveyed by the Wall Street Journal reveal commercial crude oil inventories in the United States likely increased by 2.8 million bbl during the week-ended Feb. 9. At 427.4 million bbl, commercial crude oil inventories currently stand 4% above the five-year seasonal average. Meanwhile, gasoline stocks are expected to have fallen 1 million bbl, while distillate stocks have been drawn down by 2.2 million bbl in the reviewed week. Refinery capacity use is estimated to have edged down 0.2% to 82.2%.

At settlement, WTI March futures advanced $0.95 to $77.87 bbl. International crude benchmark Brent contract for April delivery added $0.77 to $82.77 bbl. March RBOB futures moved $0.0273 higher to $2.3946 gallon and March ULSD futures dropped back $0.0237 to $2.8959 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com.