Published: Thu, September 14, 2017
Global Media | By Garry Long

Oil prices rise as Opec cuts production

Oil prices rise as Opec cuts production

It recommended that the USA strengthens its energy security to address events, such as hurricanes, by potentially adding oil products to government-held inventories.

Despite the efforts to cut output, the oil price has struggled to push durably above $50 a barrel. As I have written before, the IEA is notorious for underestimating demand and had to once again raise their forecast. The IEA said in its monthly report that product stocks for Organization of Economic Cooperation and Development countries were likely to fall below its five-year average because of Harvey.

The news caused oil prices to rise somewhat, with global benchmark Brent crude lifting 0.84 per cent to $54.29 per barrel and US West Texas Intermediate (WTI) rising 0.31 per cent to $48.22 per barrel.

"Depending on the pace of recovery for the USA refining industry post-Harvey, very soon OECD product stocks could fall to, or even below, the five-year level", the IEA's report read. Nigeria and Libya re the two countries that received exemption from the OPEC agreement that was reached last November with an aim to reduce global supplies by 1.76 million barrels via production cuts and imposed ceilings. Still, that's about in line with the group's production last month, meaning OPEC won't be able to reverse its current output curbs if it wants to keep world markets balanced next year. "Due to the demand-focused impact of Irma, we find that, by the end of September, gasoline and distillate stocks respectively are only -8 million barrels and -13 million barrels lower respectively than they otherwise would have been".

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IEA also sees demand growth of 1.6 million barrels per day this year, up from 1.5 million bpd in its prior report, on stronger-than-expected demand in the Europe and the U.S. The 32.76 million barrels a day pumped in August has marked a drop of 79,100 barrels a day from July. The multi-national agency has revised its 2017 growth estimates upwards to 1.6 million barrels per day.

Investors anticipated a rise in US crude inventories ahead of official data due later on Wednesday. Prices are still less than half their levels in mid-2014.

The United States Oil ETF (NYSEMKT: USO) traded up about 0.6%, at $9.93 in a 52-week range of $8.65 to $12.00.

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