NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures shook off early losses and rallied Tuesday afternoon after the Energy Information Administration lowered its 2018 production forecast for the United States.
The higher settlements for the futures complex came as the oil market neared oversold conditions and ahead of weekly petroleum reports that are expected to a show stock draw for crude oil and modest builds for refined products inventories.
NYMEX August West Texas Intermediate crude oil futures settled 64 cents higher at $45.04 per barrel (bbl), and the IntercontinentalExchange September Brent futures contract climbed 64 cents to $47.52 bbl. The August ULSD futures contract advanced by 2.27 cents to $1.4763 gallon and August RBOB futures rose 1.76 cents to $1.5183 gallon at settlements.
The futures complex was off to a sluggish start Tuesday morning, pressured lower overnight after Monday's gains. The early losses were underpinned by speculation a proposal for Libya and Nigeria to cap their production would not be enough to substantially reduce a global oil surplus.
Russia and other OPEC members plan to ask the two nations to come under their 15-month agreement to cut output by 1.8 million barrels per day (bpd), with Libyan production up from 730,000 bpd in May to a 1.005 million bpd four-year high in June.
However, EIA's Short-term Oil Energy Outlook issued at midday Tuesday kept the agency's U.S. oil production estimate for 2017 at 9.3 million bpd while revising down by 100,000 bpd estimated 2018 production to 9.9 million bpd.
STEO estimated world oil consumption averaged 96.918 million bpd in 2016 and is now projected to grow at a 1.5 million bpd annual rate to 98.385 million bpd this year, followed by a 1.6 million bpd rate to 100.001 million bpd next year.
Those numbers reflect downward revisions of 73,000 bpd for 2017 and 78,000 bpd for 2018.
Crude oil consumption by the Organization of Economic Cooperation and Development, which is comprised of consuming countries, is estimated at 47.15 million bpd for 2017 and at 47.53 million bpd for 2018. Those numbers reflect demand growth rate of 1.2 million bpd for both years, with the 2017 consumption revised up by 300,000 bpd versus June STEO.
At 4:30 p.m. EDT Tuesday, the American Petroleum Institute will release its weekly oil inventory data while the EIA will release its weekly data on Wednesday morning.
A survey Tuesday showed the market expects U.S. crude inventories to have been drawn down by 2.2 million bbl during the week-ended July 7 while oil products increased by 200,000 bbl for gasoline and by 700,000 bbl for distillates.
George Orwel can be reached at email@example.com
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