Oil slipped from a two-month high near $53 a barrel on Tuesday as ample global supplies countered strong demand and forecasts of another drop in U.S. crude inventories.
U.S. inventory reports due on Tuesday and Wednesday are expected to show crude stocks fell by 2.9 million barrels last week, the fifth straight week of declines. [EIA/S] But OPEC production rose in July, a Reuters survey found, despite a deal to cut output.
Brent crude LCOc1, the international benchmark, was down 30 cents at $52.42 a barrel at 1144 GMT. The contract traded intraday at $52.93, the highest since May 25. U.S. crude CLc1 was down 20 cents at $49.97.
“At the current OPEC production level, the oil market is likely to show a supply deficit of only around 500,000 barrels per day in the second half of the year,” Carsten Fritsch of Commerzbank said.
“In other words, OPEC will not achieve its goal of completely eliminating the oversupply by year’s end.”
The latest data point on whether U.S. inventories have fallen further comes from industry group the American Petroleum Institute (API), which releases its report at 2030 GMT. The U.S. government’s official data is out on Wednesday.
On the demand side, forecasters including the International Energy Agency have been raising their estimates, lending prices some support. [IEA/M] Oil company BP was upbeat, seeing demand growing by 1.4 to 1.5 million barrels per day (bpd).
“Global demand is looking pretty strong, and prices will firm around the levels seen today,” BP Chief Financial Officer Brian Gilvary told Reuters after the company reported earnings on Tuesday.
The Organization of the Petroleum Exporting Countries, as part of a deal with Russia and other non-members, is reducing output by about 1.2 million bpd from Jan. 1, 2017 until March next year to get rid of excess supply.
OPEC’s adherence to its supply cuts has been high but in recent months production has increased due in part to recovering output in countries exempt from the deal.
Oil output by OPEC rose last month by 90,000 bpd to a 2017 high, a Reuters survey found, led by a further recovery in supply from Libya, one of the exempt producers.