Oil Edges Up on Positive Demand Outlook

Oil prices climb on mixed US inventories data

Oil prices climb on mixed US inventories data

It expects strong oil demand growth and high OPEC compliance to push inventories further below the five-year average in the third quarter.

Singapore:Oil prices seesawed on Thursday, supported by healthy global demand but at the same time held back by a relentless rise in USA production that is undermining efforts led by producer cartel OPEC to cut supplies and prop up markets. Oil had rallied to a three-year high in January. The split, apparently, stems from Saudi Arabia's insistence that crude oil should be kept closer to US$70 a barrel-a level Brent touched briefly early this year-and Iran's equal insistence that US$60 is a better place for oil to trade at.

Despite Venezuela's failing regime, the South American country boasts the world's largest proven oil reserves but for years it has been considered a rogue member of the OPEC (Organisation of the Petroleum Exporting Countries) family.

Demand is set to rise by 1.5m barrels per day (bpd) in 2018 to 99.3m bpd, a 100,000 bpd upward revision compared to last month's forecast, the IEA said in its monthly oil market report.

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OPEC, Russia and several other non-OPEC producers, but not the United States, began to cut supply in January 2017 in an effort to erase a global glut of crude that had built up since 2014.

According to OPEC, the USA will be the biggest driver for supply growth with an average increase of 1.46 million barrels per day.

Crude oil futures were slightly higher Thursday morning as traders continued to weigh USA energy inventories data. The contract rose 25 cents to $60.96 on Wednesday. This is marginally higher than last month's assessment.

"There is a lot of questions around where we fall by year-end 2018 in terms of year-over-year USA production growth", Brad Hunnewell, senior equity analyst at Rockefeller & Co., said by telephone.

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Total output dropped by 77,000 bpd to 32.186 million bpd, led by declines in Iraq, the United Arab Emirates and Venezuela, according to figures OPEC collects from secondary sources. The report overshadowed a 5 million barrel gain in U.S. inventories reported Wednesday by the U.S. Energy Information Administration.

Prices also received some support from Rex Tillerson's ouster as U.S. secretary of state.

"We are now only two to four weeks away from when weekly oil inventory data will start to draw again which should be supportive for oil prices", SEB commodities strategist Bjarne Schieldrop said. A positive demand outlook from the International Energy Agency (IEA) also supported prices.

Analysts said oil may also get some support from seasonal demand, while providing at least temporary support was the unexpected replacement this week of U.S. secretary of state Rex Tillerson by Mike Pompeo, director of the Central Intelligence Agency.

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