Oil prices rise on signs of US demand, but supply threat remains
27 Mins Ago CNBC
Oil rose on Thursday, recovering some ground after a surprisingly upbeat picture of U.S. demand halted the previous day's steep slide, although the prospect of oversupply in 2018 has prompted yet more analysts to cut their price forecasts.
Brent crude futures were trading up 83 cents, or 1.7 percent, at $48.62 per barrel by 10:20 a.m. ET (1420 GMT). They tumbled 3.7 percent on Wednesday.
U.S. West Texas Intermediate (WTI) crude futures were up 85 cents, or 1.9 percent, at $45.98 per barrel. the plunged about 4 percent on Wednesday.
Data from the American Petroleum Institute (API) on Wednesday suggested U.S. crude inventories fell more sharply than expected, down 5.8 million barrels in the week to June 30, against expectations for a draw of 2.3 million barrels. Government figures that capture more of the U.S. storage market will be released at 11 a.m. ET, one day behind schedule due to the July 4 holiday.
Last week's set of data releases painted a less worrying picture of supply in the United States, where crude output has moderated.
"A change in fortunes is afoot this morning as the energy complex recoups some losses after an upbeat report from the API on U.S. petroleum stocks," PVM Oil Associates analyst Stephen Brennock said in a note.
The oil price has tumbled from one-month highs just below $50 following evidence of rising exports and increased production from the Organization of the Petroleum Exporting Countries, despite the group's commitment to bolster the market by cutting production.
Russian Energy Minister Alexander Novak said the global pact by OPEC, Russia and other producers to cut oil output had dampened price volatility and was reducing bloated inventories, so no immediate extra measures were needed to prop up prices.
OPEC and other producers led by Russia agreed to cut production by almost 1.8 million barrels per day (bpd) from January this year to rein in inventories and support prices. The deal runs to March 2018.
Despite the initiative, oil prices have registered their biggest first-half decline in almost two decades, as OPEC-led supply cuts have been undermined by rising output in the United States and from other producers not bound by the global pact.
"Against expectations, OECD total oil inventories are still above 3 billion barrels and the recovery in Libyan and Nigerian supplies, coupled with a fast return of U.S. shale, should prevent steep stock draws ahead," Bank of America Merrill Lynch said, adding that output was set to rise further.
The bank cut its average Brent forecasts to $50 this year and $52 per barrel in 2018, from $54 and $56 before.
Bernstein Research reduced its average Brent forecasts for 2017 and 2018 to $50 per barrel each, from $60 and $70 previously.
Bernstein said the reduction resulted from an expected increase in U.S. shale oil output.
Denmark's Saxo Bank said oil prices could rise towards $55 in coming months, but it expected lower prices towards the end of the year and into 2018, especially if OPEC and Russia fail to extend their production cut beyond the first quarter of 2018.
— CNBC's Tom DiChristopher contributed to this story.