Oil prices up amid IEA's optimistic oil demand forecasts

Oil prices climb on stronger demand

Oil prices climb on stronger demand

In its latest oil market report, the International Energy Agency (IEA) said that there are two hitches this month, which are a dramatic recovery in oil production from Libya and Nigeria, and a lower rate of compliance by OPEC with its own output agreement.

The IEA's report said that compliance with the agreement, which brought in ten non-cartel countries, including Russian Federation, in the hope of dampening oversupply, fell to 78 per cent last month, down from 95 per cent in May.

The Organization of the Petroleum Exporting Countries and several non-OPEC producers including Russian Federation have agreed to cut production by around 1.8 million barrels per day until March 2018 to ease a global crude glut spurred by booming US output.

Brent crude fell 34 cents to $47.40 a barrel by 0834 GMT and US light crude was down 32 cents at $45.17.

"A lower forecast for crude oil prices is expected to shave a little off projected growth in U.S. oil production next year compared with the previous forecast, but annual output is still on track to reach a record high in 2018", U.S. EIA acting administrator Howard Gruenspecht said in a statement, reports CNBC.

"As a serious member of OPEC, we stand ready to support the cuts when we are sure that we can have a stable predictable production", Kachikwu said. OECD stocks are still 266 million barrels above the five-year average, the IEA said.

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Companies such as EOG Resources Inc., one of the financially strongest US shale producers, are turning to drillcos.

He noted that: "Over the last one and half months, we've basically began to recover some of our assets that were vandalised and we've been getting a lot more cooperation from the militants that they are letting us continue to try and grow those barrels, but that recovery is going to be gradual, we'll still have below the benchmark set for us by OPEC", Kachikwu explained.

The U.S. Energy Information Administration (EIA) now forecasts Brent crude oil spot prices to average $51 per barrel (/b) in 2017 and $52/b in 2018.

Similarly, the US EIA has also cut its WTI forecast for 2017 from $50.78 per barrel to $48.95 per barrel and for 2018 from $53.61 per barrel to $49.58 per barrel.

"OPEC compliance with production cuts slipped to 98 percent in June, but more importantly output from exempt (from cutting) members Libya and Nigeria is now about 700,000 bpd higher than at the time of the November OPEC agreement, offsetting about 60 percent of the OPEC cuts". And Barclays is also gloomy - their analysts say forget oil prices moving back above $US50 a barrel this northern summer.

Rising demand is helping to drain a global fuel glut but rebalancing of the market is taking longer than anticipated. The IEA expects US crude production to grow by 780,000 barrels per day next year.

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