Investing.com - When the world’s oil producers issue an outlook after choking the market of supply to deliberately create a lopsided supply-demand situation, there can be little surprise on what they’ll say — or how the market might react.
Crude prices continued their surge in Tuesday’s trade, with global benchmark Brent shooting above $92 per barrel and U.S. West Texas Intermediate, or WTI, breaching $89, both for the first time in 10 months as traders responded to the latest monthly forecasts on oil supply-demand from the Organization of the Petroleum Exporting Countries, or OPEC.
The forecasts came just a week after Saudi Arabia and Russia, allies under an OPEC offshoot called OPEC+, announced that they would jointly remove 1.3 million barrels per day from the market till the year end.
In its outlook, the Saudi-led OPEC unsurprisingly forecast robust growth in global oil demand in 2023 and 2024, saying major economies were expected to do better than expected — despite signs that global inflation was surging again from crude prices nearing triple digits. OPEC's monthly report forecast world oil demand will rise by 2.25 million barrels per day in 2024.
The Paris-based International Energy Agency, or IEA, which represents oil consuming countries, had a different take on the whole thing for 2024.
While the EIA acknowledged that the current bull fervor in the market could indeed take prices higher in the near term, it nevertheless forecast weaker demand for oil from next year onwards.
In 2024, demand growth for oil is forecast to slow sharply to 1 million barrels per day, the IEA said. It cited lackluster macroeconomic conditions, a post-pandemic recovery running out of steam and the burgeoning use of electric vehicles as among reasons.
The IEA revised down its demand growth forecast for next year by 150,000 barrels per day from the estimate it made in August.
"With the post-pandemic rebound largely completed and as multiple headwinds challenge the OECD's outlook, oil consumption gains slow markedly," the IEA said, referring to the Organisation for Economic Co-operation and Development nations.
"The global economic outlook remains challenging in the face of soaring interest rates and tighter bank credit, squeezing businesses that are already having to cope with sluggish manufacturing and trade," the IEA added.
Traders, however, went with OPEC’s more dramatized outlook on the supply squeeze.
"Crude prices are rallying after the OPEC monthly report showed the oil market is going to be a lot tighter than initially thought," said Ed Moya, analyst at online trading platform OANDA.
London-traded Brent settled Tuesday’s trade at $92.06, up $1.42, or 1.6%. It earlier hit $92.39, its highest since November 2022.
New York-traded WTI closed the official trading for the day at $88.84, after rising $1.55, or 1.8%. It hit a 10-month high of $89.36 earlier in the session.
Aside from the OPEC outlook issued Tuesday, crude prices were also pressured upwards from the disruption of four oil export terminals in OPEC member Libya due to a deadly storm. Kazakhstan, an OPEC+ ally, also said it was reducing its daily oil output for maintenance.
Market participants were also on the lookout for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.
The API will release at approximately 16:30 ET (21:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended Sept 8. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.
For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 2.0 million barrels, to add to the 6.307M-barrel reduction reported during the week to Sept. 1.
On the gasoline inventory front, the consensus is for a draw of 1.0M barrels on top of the 2.666M-barrel decline in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With distillate stockpiles, the expectation is for a drop of 1.0M barrels versus the prior week’s gain of 0.679M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
(Peter Nurse and Ambar Warrick contributed to this item)