Oil edged up
on Tuesday, lifted by a strong demand outlook for the coming weeks, but overall
market conditions remain weak on the back of an ongoing fuel supply
overhang,
prompting several banks to cut their price forecasts.
Brent crude
futures were at $47.01 per barrel at 0545 GMT, up 13 cents, or 0.3 percent,
from their last close.
U.S. West
Texas Intermediate (WTI) crude futures were up 10 cents, or 0.2 percent, at
$44.50 per barrel.
Traders said
the uptick in prices was in part due to healthy demand expected in the coming
weeks.
Weekly U.S.
gasoline demand data "compares favorably to the five-year average and
miles driven also continue to grow year-on-year," said Bank of America
Merrill Lynch.
However,
beyond the seasonal strength, "U.S. gasoline demand may have peaked in
absolute terms last year", it said, adding that there was no structural
tightness in sight once the peak demand summer season finishes.
Crude prices
are about 18 percent below their 2017 opening levels despite a deal led by the
Organization of the Petroleum Exporting Countries (OPEC) to cut production from
January.
OPEC along
with some other major exporters like Russia agreed to hold back around 1.8
million barrels per day (bpd) of production between January this year and March
2018.
However, an
over 10 percent jump since mid-2016 in U.S. production to 9.34 million bpd, as
well as rising output from Nigeria and Libya, OPEC-members who were exempt from
cutting, have undermined efforts to tighten the market.
OPEC
exported 25.92 million bpd in June, 450,000 bpd more than in May and 1.9
million bpd more than a year earlier.
"OPEC
has yet to address this increase in production," U.S. bank Goldman Sachs
said, but added that there was a chance that OPEC could introduce a deeper
output cut in a "shock and awe manner, with little public
announcement".
Should no
further cuts happen, Goldman said crude prices could fall below $40 per barrel.
BNP Paribas
said that "the simple truth is that OPEC and Russia have to contend with
the fact that there is output growth elsewhere diluting their efforts at
reducing supply."
The French
bank therefore said it had made "deep cuts" to its crude price
forecasts.
"We now
see the price of WTI averaging $49 per barrel 2017 (-$8/barrel revision) and
that of Brent $51 per barrel (-$9/barrel revision). We also revise downwards
2018 with WTI averaging $45 per barrel (-$16 per barrel) and Brent $48 per
barrel (-$15/barrel revision)," BNP said.
Britain's
Barclays bank said on Tuesday that it had cut its average 2017 and 2018 Brent
price forecasts to $52 per barrel for both years from $55 and $57 per barrel
respectively.
Reuters*
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