Oil Prices Extend Gains on IEA Forecast and OPEC's Upbeat Remarks

Oil prices extended gains for the third session on Tuesday, finding support from strong demand expectations, and as ministers from the Organization of the Petroleum Exporting Countries (OPEC) showed the strength of its accord to curb output to raise prices.

Benchmark Brent crude for May delivery was up 0.8 percent to $66.11 per barrel. US West Texas Intermediate (WTI) crude futures for April contract, on the other hand, climbed 1 percent to $63.22.

Analysts said prices were also bolstered by bullish remarks from ministers of OPEC and other global industry participants at the annual CERAWeek energy conference in Houston on Monday.

Focus will now be on the weekly report by the American Petroleum Institute (API) on US oil inventories due later in the day, while official figures by the US Energy Information Administration (EIA) will be presented on Wednesday.

Rising US crude output has put oil prices under pressure in recent months amid concerns that it could negatively impact global efforts to relieve the market from supply glut.    

IEA Oil Demand Forecast and OPEC Output

Oil prices rose further after the International Energy Agency (IEA) stated on Monday that global oil demand will grow in the next five years, while output from OPEC producers would increase gradually.

IEA expects annual oil demand growth worldwide to reach about 1.1 percent to 2023, noting that OPEC would be unable to considerably raise its production capacity.  

As its shale oil production was on track to grow, the US is expected to supply much of the world’s oil demand for the next few years to fill the space between OPEC and global demand.

The country’s crude production has already surpassed top exporter Saudi Arabia to 10.28 million barrels per day.

IEA expects the US would become the world’s top oil producer by 2023, with output reaching nearly 17 million bpd.

US crude supplies were also estimated to increase by 3 million barrels in the week to March 2, marking a second consecutive week gain, according to data by a London-based news agency.

However, senior market analyst Phil Flynn said on Monday that IEA stated that rising oil production from the US alone will have to take in 80 percent of the world’s demand growth, with the country’s output set to raise 3.7 million bpd over the next five years.

Canada, Brazil, and Norway will cover the remainder, leaving no room for more OPEC supply.

United Arab Emirates’ (UAE) oil minister and OPEC’s current president Suhail Mohamed Al Mazrouei stated that without OPEC, turmoil could arise in the market.

Flynn added if IEA’s forecast turned out wrong, and the US failed to meet growth target, then the world is likely to become undersupplied.

With regards to extending cuts into 2019, Al Mazrouei said there had been no discussions about it.

OPEC, along with other major producers, agreed to curb output by 1.8 million barrels per day (bpd) to rid of excess supplies. The deal started in January 2017 and was extended until the end of 2018.

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