DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session with sharp gains triggered by forecasts of a tighter global oil market in the fourth quarter exacerbated by extended production and export cuts from Saudi Arabia and Russia.

Global oil inventories are currently falling at a 600,000-bpd rate, according to estimates from the U.S. Energy Information Administration, pressured by solid demand growth in the third quarter and ongoing supply curbs from OPEC+. Following a Sept. 5th extension of voluntary production cuts of 1 million bpd through Dec. 31 by Saudi Arabia, worldwide inventories are expected to fall each consecutive month through the end of the year before flipping into builds at the start of 2024. As a result, EIA expects the market price for Brent to remain above $90 bbl through the first quarter 2024 before sliding to $87 bbl over the remaining three quarters of next year.

"However, the potential for continued voluntary production cuts creates some upside risk for oil prices," notes EIA in its Short-term Energy Outlook released Tuesday afternoon.

Similar sentiment was echoed this morning by OPEC economists who estimated commercial crude stocks held by countries that are part of the Organization for Economic Cooperation and Development were drawn down 14.2 million bbl in July to 2.779 billion bbl, some 190 million bbl below the 2015–2019 average.

In its Monthly Oil Market Report, OPEC said oil production from its 13 members increased 113,000 bpd in August to 27.449 million bpd, with output gains led by Iran and Nigeria. However, Saudi Arabia, the de-facto leader of OPEC, curtailed output by 88,000 bpd, according to secondary sources, with total production falling below 9 million bpd to 8.918 million bpd in August.

For non-OPEC supply growth, the cartel revised its forecast upward by 200,000 bpd to 1.6 million bpd in 2023, driven by the United States, Brazil, Norway, Kazakhstan, and Guyana. For 2024, non-OPEC liquids production is expected to grow 1.4 million bpd, unchanged from the previous month's assessment.

On the demand side, OPEC left its global consumption growth projection unchanged for this year at 2.4 million bpd, driven mainly by demand gains in the non-OECD region that are expected to rise by 2.3 million bpd.

Further spurring gains for the crude complex, analysts anticipate commercial crude oil inventories in the United States declined by 1.9 million bbl during the first week of September, which would mark the fifth consecutive drawdown from nationwide stockpiles. Since mid-July, domestic crude oil inventory has been drawn down by more than 47 million bbl and currently stands 4% below the seasonal average. Gasoline inventories, meanwhile, are also expected to fall by 300,000 bbl from the previous week, while stocks of distillates, which are mostly diesel fuel, are seen increasing by 400,000 bbl.

Refinery run rate likely fell 0.2% from the previous week to 92.9% of capacity, while refinery turnarounds are planned to start next week and continue into early November.

The American Petroleum Institute will release its weekly inventory survey at 4:30 PM ET, followed by official data from the EIA Wednesday morning.

At settlement, NYMEX October WTI futures rallied $1.55 bbl or 1.8% to $88.84 bbl, and ICE November Brent finished the session a tad above $92 at $92.06 bbl, adding $1.42 on the session. NYMEX October RBOB futures gained $0.0092 to settle at $2.7279 gallon. Moving in the oppositive direction, the front-month ULSD contract declined $0.0339 from a more than seven-month high to $3.3283 gallon on profit taking.

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