WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced more than 3% on Tuesday, with U.S. crude benchmark rebounding from a three-month low and the global benchmark from a 19-month low after OPEC said in its Monthly Oil Market Report that the group's largest members sharply slashed crude output ahead of the announcement of a unilateral production cut by Saudi Arabia, meaning the global market balance will likely tighten sharply in the second half of the year.
In its monthly report released this morning, OPEC said output from its 13 members slumped by 464,000 bpd to 28.07 million bpd in May, led by a 519,000-bpd production drop in Saudi Arabia. Other Gulf members also reduced output significantly ahead of the latest production revisions made on June 4, with United Arab Emirates reducing crude output by 140,000 bpd in May from April to 2.894 million bpd and Kuwait slashing output by 95,000 bpd to 2.555 million bpd from April to May.
The drop in production suggests the group's core members in the Gulf have largely made good on their pledge announced in April to reduce their collective output. OPEC and allied partners led by Russia, collectively known as OPEC+, pledged to extend 3.6 million bpd in production curbs through the end of 2024, while Saudi Arabia unveiled an additional 1 million bpd output cut for July that could be extended beyond that timeframe.
On the demand side, OPEC left its global oil consumption forecast largely unchanged at a 2.3 million bpd growth rate for this year to 101.91 million bpd. The group also made no major changes to its forecasts for global economic growth, which it continues to see at 2.6% this year. China's economy will grow by 5.2% in 2023 while the economy of the eurozone is expected to grow by 0.8%, in line with earlier forecasts. The exception was the U.S. economy, which OPEC said it expects to grow by 1.3% this year, up from last month's 1.2% forecast.
Separately, oil traders also await the release of weekly inventory data from the American Petroleum Institute due out 4:30 pm ET, followed by official data from the U.S. Energy Information Administration Wednesday morning.
U.S. commercial crude oil stockpiles are projected to have decreased by 300,000 bbl for the week ended June 9, with estimates ranging from a decrease of 2.5 million bbl to an increase of 2 million bbl.
The estimate for a decrease comes despite a Department of Energy report on Monday indicating DOE disbursed another 1.9 million bbl of crude last week from the nation's Strategic Petroleum Reserve. That would bring those emergency crude supplies down to a 40-year low of 352 million bbl.
Gasoline inventories are expected to have risen by 100,000 bbl from the previous week and stocks of distillates, which is mostly diesel fuel, are expected to have increased by 1 million bbl from the previous week. Refinery use was likely unchanged from the previous week at a 95.8% run rate, which is the highest utilization level in nearly four years.
At settlement, NYMEX West Texas Intermediate July futures advanced $2.30 to $69.42 bbl, while the August contract for the Brent contract added $2.45 to $74.29 bbl. NYMEX RBOB July futures rallied $0.0753 gallon to $2.5579 gallon and ULSD July futures gained to $2.3955 gallon, up $0.0864 on the session.
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