Oil Higher in Tuesday Trade
NEW YORK (DTN) -- New York Mercantile Exchange oil futures were higher Tuesday morning although holding inside of Monday's trade range, supported by a new bullish supply and demand outlook from International Energy Agency and expectations the Organization of the Petroleum Exporting Countries would prolong their ongoing crude oil production cuts through March 2018.
The Paris-based IEA said in its Oil Market Report for May released this morning that the global oil market is already rebalancing, with supply falling and demand improving.
"In [the first quarter], we might not have seen a resounding return to deficits but this Report confirms our recent message that re-balancing is essentially here and, in the short term at least, is accelerating," IEA said.
The IEA report estimated global oil supply fell by 140,000 bpd to 96.17 million bpd in April even as OPEC crude oil production increased 65,000 bpd to 31.78 million bpd. The agency raised its forecast for non-OPEC supply for this year, saying non-OPEC supply is set to increase 600,000 bpd in 2017 to 58.3 million bpd, revised up 125,000 bpd from the April outlook.
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In nations that are part of the Organization for Economic Cooperation and Development, stocks grew by 300,000 bpd for the first quarter as a whole, nearly offset by falls in floating stocks and in other centers. IEA expects world oil demand to outstrip supply by 700,000 bpd in the second quarter, and added that oil demand would continue to grow over the next few months as refineries ramp up crude runs.
This is the final monthly report for May after the Energy Information Administration's report last week raised global demand estimates for 2017 while raising their non-OPEC supply outlook. OPEC's monthly report last week also raised the outlook for non-OPEC supply while maintaining global demand estimates.
Oil futures were also supported by expectations petroleum inventories in the United States declined in the week-ended May 12 and on a decision Monday by Russia and Saudi Arabia to prolong ongoing production cuts of nearly 1.8 million bpd by OPEC and their 11 non-OPEC allies through March 2018.
OPEC and their allies including Russia are scheduled to meet on May 25 to officially approve the decision to extend cuts for nine more months after the current quota scheme expires on June 30. Kuwait today said they supported the initiative by Russia and Saudi Arabia.
On the domestic front, a new survey of analysts this morning showed crude stockpiles declined for the second straight week, down by 2.4 million bbl while gasoline and distillate supplies were each drawn down by 1.4 million bbl during the week-ended May 12.
In addition, the U.S. dollar index fell to the lowest level since Nov. 9, 2016, with a weakening greenback supportive of NYMEX crude oil futures.
In early trade, NYMEX June West Texas Intermediate crude oil futures climbed 34cts to $49.19 bbl, with the contract expected again to test resistance at $49.50. The July Brent crude futures contract on the IntercontinentalExchange rose 36cts to $52.18 bbl. The Brent premium to WTI was little changed at $2.99 bbl.
In products trade, NYMEX June ULSD futures added 1.80cts to $1.5276 gallon, and June RBOB futures gained 1.56cts to $1.6110 gallon.
George Orwel can be reached at george.orwel@dtn.com
(CZ)
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