WASHINGTON (DTN) -- New York Mercantile Exchange West Texas Intermediate and Brent crude on the Intercontinental Exchange settled modestly higher on Friday, and advanced for the seventh consecutive week. The gains came after the three major forecasting agencies said this week global oil market fundamentals strengthened considerably over the summer months, which is reflected in widening backwardated market structures for the crude benchmarks.
The International Energy Agency, Organization of the Petroleum Exporting Countries, and U.S. Energy Informational Administration were in rare agreement this week with forecasts that the oil market will slide into deeper deficit through the end of 2023 on steep production cuts from OPEC+ and stronger oil consumption.
On the demand side, IEA Friday morning said worldwide oil demand climbed to a fresh record-high 103 million barrels per day (bpd) over the June-July period, and is likely to soar higher in August, bringing annualized growth in oil consumption to 2.2 million bpd. Next year, the Paris-based energy watchdog expects demand growth to moderate to 1 million bpd amid macroeconomic headwinds in China and an environment of high interest rates in countries in the Organization for Economic Cooperation and Development bloc.
"World oil demand is scaling record highs, boosted by strong summer air travel, increased oil use in power generation and surging Chinese petrochemical activity," said IEA in its August Oil Market Report.
Meanwhile, the largest oil producers with OPEC+, Saudi Arabia and Russia, continue to restrain supplies to the global oil market in their efforts to boost prices and revenue. In its Monthly Oil Market Report released on Thursday, OPEC said Saudi oil production plunged by 968,000 bpd last month to 9.021 million bpd -- the lowest output rate since the global disruption caused by the pandemic in 2020.
Saudi Arabia on Aug. 3 extended a 1-million-bpd production cut for a third month into September and said it could further extend the cut or even deepen the reduction into the fourth quarter. Russia also saw a steep decline to its crude output and exports, according to OPEC, with oil production falling to 9.93 million bpd in the third quarter, down from 11.2 million bpd reported at the start of the year.
On a combination of OPEC+ cuts and higher demand expectations, EIA projected global oil inventories to decline consistently through the end of the year, putting upward pressure on oil prices. The Washington-based energy watchdog estimates crude inventories across industrialized countries will decrease by an average of 400,000 bpd in the second half of the year before reversing back to builds in the second quarter 2024.
"The Brent crude oil spot price in our forecast increases in the coming months, reflecting our expectations of tightening balances in global oil markets. Crude oil prices begin to ease in second-quarter 2024 as supply growth leads to some rebuilding of global oil inventories later in 2024," said EIA.
United States, Canada, Brazil, Norway, and Guyana are expected to drive growth in global oil supply with combined production gains of 2.1 million bpd this year and 1.2 million bpd in 2024. The United States is expected to lead non-OPEC growth, contributing 1.3 million bpd of supply growth in 2023 and 500,000 bpd in 2024.
At settlement, NYMEX WTI September futures gained $0.37 to $83.19 per barrel (bbl), and ICE Brent October futures finished the session at $86.81 per bbl, up $0.41. NYMEX September RBOB futures advanced $0.0602 to $2.9649 per gallon, and the September ULSD contract settled the session at $3.1215 per gallon, retreating for the second straight session from a six-month high $3.2070 per gallon settlement.
Liubov Georges can be reached at Liubov.Georges@dtn.com