Oil prices edged up on Tuesday, lifted in part by a strong demand outlook for the coming weeks, but overall market conditions remain weak on the back of ample supplies and a more subdued outlook for long-term demand.
Brent crude futures were at $47.07 per barrel at 0359 GMT, up 19 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $44.56 per barrel, up 16 cents, or 0.4 percent.
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 17 percent below their 2017 opening levels despite a deal led by the Organisation 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 ten 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.
“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,” French bank BNP Paribas said.
“We thus have made deep cuts to our crude oil price forecasts. We now seethe 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.
Barclays said that the lower prices were a result of improved technology, which “stands to keep output elevated”.