DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange added to gains in early trading Wednesday after the International Energy Agency forecast global oil demand is set to outpace gains in marginal supply growth in the second half of the year, leading to tight market balances exacerbated by voluntary supply cuts from Saudi Arabia.

In its Monthly Oil Market Report released Wednesday morning, IEA said global oil demand will expand by 2.4 million barrels per day (bpd) this year to a new record-high 102.3 million bpd. China will account for 60% of those gains, according to IEA analysts, with soaring transport and petrochemical use propelling apparent consumption in April to an all-time high of 16.3 million bpd. Indian demand is estimated to be equally robust with the latest readings for May showing both gasoline and diesel breaking records.

"Oil markets are struggling for direction as conflicting data points cloud the outlook. Bearish macroeconomic indicators and concerns over demand growth are clashing with resurgent oil use in key consuming countries. Oil prices appear to be taking their cue from the former, with benchmark North Sea Dated trading at $73 barrel (bbl) -- nearly half the high of 2022 -- despite a looming supply deficit," said IEA in its monthly report.

While oil demand is expected to continue to rise, both seasonally and structurally over the remainder of the year, only a marginal increase in supply is foreseen. In May, global oil production fell by 660,000 bpd to 100.6 million bpd. Deeper cuts from some OPEC+ producers kicked in while output from Iraq's northern Kurdish region and some Canadian oilsands remained shut in. Saudi Arabia, with its voluntary cut of 500,000 bpd agreed in April, led the monthly drop in world supply.

Total oil production this year is forecast to reach 101.3 million bpd, implying global oil market will fall into deficit of about 1 million bpd for the second half of the year.

Production gains outside of OPEC+ will lead supply growth through the next year, adding 1.9 million bpd in 2023 and 1.2 million bpd next year.

Separately, oil traders are also waiting for the weekly inventory report from the U.S. Energy Information Administration scheduled for 10:30 a.m. EDT release. Preliminary data from the American Petroleum Institute reported late Tuesday commercial crude stocks increased 1.024 million bbl during the week ended June 9, missing calls for a 300,000-bbl draw. Stocks at the Cushing, Oklahoma, tank farm -- the New York Mercantile Exchange delivery point for West Texas Intermediate futures -- posted a build of 1.502 million bbl. The unexpected build came as a Department of Energy report on Monday indicated 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. API reports gasoline inventory increased 2.075 million as of June 9, well above an expected 100,000 bbl increase. Distillate inventory rose 1.394 million bbl last week versus calls for a build of 1 million bbl.

Near 7:45 a.m. EDT, NYMEX West Texas Intermediate July futures advanced $0.82 to $70.22 bbl, while the August Brent contract added $0.94 to $75.22 bbl. NYMEX RBOB July futures rallied $0.0107 gallon to $2.5686 gallon and ULSD July futures gained to $2.4099 gallon, up $0.0144 on the session.

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