Oil prices stable as OPEC says market is rebalancing

Crude Oil

Crude Oil

OPEC forecast higher demand for its oil in 2018 on Wednesday and said its production-cutting deal with rival producers was getting rid of a glut, pointing to a tighter market that could move into a deficit next year.

Saudi Arabia told the Organization of the Petroleum Exporting Countries on Wednesday that it pumped 9.97 million barrels per day in September, up about 22,000 barrels per day from August, but still below its OPEC target.

Saudi Arabia and Russian Federation helped secure a deal between the Organization of the Petroleum Exporting Countries and 10 rival producers to cut output by about 1.8 million barrels per day (bpd) until the end of March 2018 in an effort to reduce a glut.

The West Texas Intermediate for November delivery on Tuesday increased $1.34 to settle at $50.92 a barrel on the New York Mercantile Exchange, while Brent crude for December delivery rose $0.82 to close at $56.61 a barrel on the London ICE Futures Exchange. The main USA contract, WTI, was at $51.30. "In an alternative scenario, sustained weakness below $49, which is also under the 50 (day) daily simple moving average, may open a path towards $47.80".

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OPEC will meet again in November, and there are signs that the group will decide to continue the production deal longer than the previously agreed upon March 2018 deadline.

But with strong oil demand growth, summer demand, and Brent futures flipping to backwardation, the OECD commercial stocks have started to draw down faster in the summer. OPEC has a scheduled meeting for the end of next month in Vienna.

"I think the market is able to absorb that 2 million bpd of USA exports easily", Glencore's head of oil trading Alex Beard told the Reuters Global Commodities Summit. However, many facilities have begun resuming operations. Those cuts are now set to expire in March. A federal holiday on Monday has delayed the release of the weekly United States inventory data by a day. USA crude inventories probably fell for a third straight week, while refined product stockpiles also likely declined, a preliminary Reuters poll showed on Tuesday.

Increasing demand for oil will be matched by added supplies, but Opec's forecasts for the balance of supply and demand foresee a greater reliance on the cartel's output.

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