WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange reversed higher in afternoon trade Tuesday after the U.S. Energy Information Administration (EIA) boosted its 2021 price outlook for U.S. and international crude benchmarks, reflecting an accelerated pace of fuel consumption in countries that are part of the Organization for Economic Cooperation and Development. Also, OPEC+'s gradual easing in production quotas leaves intact a global destocking pattern through the end of 2021.
In its monthly Short-term Energy Outlook released Tuesday afternoon, the government agency raised the price of West Texas Intermediate crude by 5% from May's forecast to an average of $61.85 barrel (bbl). Brent crude is expected to average $65.19 for the reminder of the year, up 4.7% from the previous forecast.
EIA sees global oil demand averaging 97.67 million barrels per day (bpd) this year, with most gains in fuel demand coming from the United States and the European Union where accelerated vaccinations and generous stimulus programs spurred unparalleled economic growth. Atlanta's GDP Now model shows U.S. gross domestic product is growing at an average rate of 10.8% in the second quarter, despite elevated levels of unemployment and disruptions in global supply chains. EIA revised higher its global economic growth outlook by 0.1% from the previous month to 6.2%.
This morning, Eurostat halved its estimate of the decline in first quarter Eurozone gross domestic product from a 0.6% decline to 0.3% contraction, although the figures confirmed the 19-nation bloc was indeed in recession in the first three months of the year. But of the continent's four biggest economies, only France experienced a recession, with Italy growing in the first quarter, and Germany and Spain avoiding a fourth quarter contraction. Recession is technically identified by two consecutive quarters of falling growth.
EIA did revise lower demand projections for countries outside of OECD, where coronavirus infections continue to spread, hampering short-term growth prospects; 2021 non-OECD oil demand was revised lower by 80,000 bpd to 53.34 million bpd.
On the supply side, the agency expects production from the countries that are part of the OPEC+ coalition to rise by 1.8 million bpd in the third quarter to 28.7 million bpd, reflecting a gradual increase of output quotas. On June 1, OPEC+ agreed to bring back 350,000 bpd of restrained crude production in June and 441,000 bpd in July. Saudi Arabia will also continue to unwind the 1 million bpd in an additional unilateral cut it made early this year, returning 350,000 bpd this month and 400,000 bpd in July.
Domestically, U.S. commercial crude oil stockpiles are expected to have decreased by 2.3 million barrels (bbl) during the week ended June 4, while refinery use likely rose by 0.6% to 89.3% of capacity from the previous week. Gasoline stockpiles are expected to have risen 300,000 bbl from the previous week and stocks of distillates are seen to have gained 1.3 million bbl.
The American Petroleum Institute will release its weekly inventory data at 4:30 p.m. EDT Tuesday and the EIA at 10:30 a.m. EDT Wednesday.
Tuesday afternoon, July WTI futures advanced $0.82 to settle just above $70 bbl at $70.05 bbl and the August Brent contract rallied $0.76 to $72.22 bbl. NYMEX July ULSD futures gained 1.94 cents to $2.1350 gallon and the front-month RBOB contact rallied 2.59 cents for a $2.2190 gallon settlement.
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