Oil prices rose on Wednesday after the International Energy Agency (IEA) said earlier today that oil demand growth continues to be solid and that global oil inventories are shrinking.
At 10:45am CST, WTI was up 1.51 percent at US$48.96, while Brent was trading up 1.07 percent at US$54.85.
Global oil demand grew "very strongly" year-on-year in the second quarter this year, which prompted the IEA to revise up its growth estimate to 1.6 million bpd for this year. This is the second consecutive month in which the agency has lifted its demand growth forecast after it revised up the growth estimate to 1.5 million bpd in August.
Although Hurricanes Harvey and Irma are expected to slow U.S. oil demand growth in the third quarter this year, "OECD demand growth continues to be stronger than expected, particularly in Europe and the US," the IEA said today.
On the other hand, also supporting the oil prices, was the fact that OPEC production dropped in August for the first time in five months, following production disruptions in Libya and other OPEC members producing less crude. OPEC's members bound by the pact achieved an 82 percent compliance rate in August, higher than the 75 percent in July. Year to date, compliance within OPEC stands at 86 percent, according to the IEA.
The OECD commercial stocks surplus over the five-year average dropped to 190 million barrels in July, compared to more than 219 million barrels above the five-year average as of the end of June.
"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly," the agency said.
The market is tightening but OPEC's goal to reduce inventories is happening gradually and slowly, perhaps "a little more slowly than they would have liked," Neil Atkinson, head of oil industry and markets at IEA, told Bloomberg in comments on the agency's report.
According to the IEA, OPEC may not change dramatically the supply side in 2018. Related: Is Russia Pushing Saudi Arabia Out Of Asia?
"If OPEC were, as a scenario, not a forecast, to maintain its current level of production throughout the rest of '17 and through '18, then, yes, stocks at the moment would not fall dramatically, but that will change. It's not going to be that picture necessarily," Atkinson said.
"We could see more upside to demand, which will of course change the picture as far as the balance goes," he noted.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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