Oil prices rose yesterday after the International Energy Agency (IEA) said the global oil surplus was starting to shrink due to robust global demand and an output drop from Opec and other producers.
Members of the Organization of Petroleum Exporting Countries and other producers including Russian Federation have pledged to reduce crude output by about 1.8 million barrels a day through March to trim global oil inventories and buttress prices.
"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly", the IEA, which coordinates energy policies in industrialized nations, said in its monthly report.
"At this point, there is an expected hit to gasoline demand from Hurricane Irma in Florida, but we are hearing that the infrastructure isn't as bad off as feared", said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, in a telephone interview. OPEC supply fell by 210,000 barrels, marking the first decline in five months.
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By Thursday and Friday , summertime type showers and storms will be back in the forecast, although nothing higher that 30%. Now that Irma has fizzled, we only have to rid ourselves of Jose to have a well-deserved break in the tropical Atlantic.
Oil has traded in a tight range this month, as output cuts by the members of the Organization of Petroleum Exporting Countries and its allies are thought to be negated by production elsewhere. Their compliance for the year so far was 86 percent.
According to EIA, the global oil surplus is beginning to shrink due to stronger-than-expected European and United States demand growth, as well as production declines in OPEC and non-OPEC countries.
Gasoline stockpiles were down 8.4 million barrels for the week, the EIA said.
"On the one hand, the smaller-than-anticipated crude [supply] build, coupled with large draws to product stocks should provide support to crude prices, but continued weakness in refinery demand and rebounding production could serve to overshadow this signal", Troy Vincent, oil analyst at ClipperData, told MarketWatch.
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With ongoing rebalancing, the IEA raised its call on OPEC's oil by 0.1 million bpd for both 2017 and 2018. For 2018, the world will need 32.4 million bpd of crude from OPEC.
Gasoline surged and oil was steady as flooding from Tropical Storm Harvey inundated refining centers along the Texas coast, shutting more than 10 percent of USA fuel-making capacity.
The IEA revised down the global refinery throughput forecast for the third quarter of 2017 by 0.7 million bpd due to Harvey.
Saudi Arabian Energy Minister Khalid Al-Falih agreed with his Venezuelan, Kazakh and UAE counterparts on Monday to keep all options open in their push to re-balance oil markets. As of March 2017, 49% of total US working crude oil storage capacity and more than 40% of working storage capacity for both motor gasoline and diesel fuel were located in the Gulf Coast region.
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