Global oil stocks shrinking on robust demand: IEA

Global oil stocks shrinking on robust demand: IEA

Crude oil prices was on the rise this week as OPEC reported lowered production in August, down to 32.755 million barrels daily per month in August, down from 32.834 million bpd in July, according to OPEC's Monthly Oil Market Report published on Tuesday. Despite the destructive hurricanes, cotton prices have tumbled on expectations of a bumper crop in the USA, increasing the supply significantly.

In its monthly oil market report the OPEC's research arm said better-than-expected numbers from industrialised nations in the West and China has led it to raise its oil demand growth estimate for 2017 to 1.42 million barrels a day (b/). 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.

"It's going to take some time for the markets to figure out the full impacts of the hurricanes but certainly from an oil production standpoint there was very little, if any, disruption", said Joe McMonigle, energy policy analyst at Hedgeye Potomac Research in Washington. This compared to expectations that inventories would rise by 3-million barrels.

Refineries on the Gulf of Mexico coast continue to recover after the Hurricane Harvey.

The report also stated that refineries reduced output following Hurricane Harvey, while gasoline and distillate inventories declined.

Data from the Energy Information Administration shows a build in US crude inventories last week of 5.9 million barrels, exceeding expectations.

For months, the oil cartel OPEC has anxious about what it should be doing as its plan to restrict its collective crude production (and hopefully kick off a price rebound) was failing.

If these weren't enough, the U.S. Energy Information Administration lowered its oil production forecast for this year and the next by 1% and 0.7%, respectively. Growth is forecast to average 700,000 b/d in 2017 and almost 1.5 mb/d in 2018 as higher production from Canada and the North Sea offsets weaker U.S. and Brazilian estimates. "Undoubtedly this boost in demand will contribute to further reductions in commercial oil inventories", he said.

Strong demand from the United States and Europe in the second quarter and robust consumption from elsewhere will outweigh an expected slowdown from Hurricanes Harvey and Irma in the third quarter. The IEA said it is time to reexamine the region's energy security with the USA adding refined products to the country's strategic petroleum reserves alongside crude.

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