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Oil rises on firm short-term demand outlook; overall market still weak

Published 2017-07-10, 09:59 p/m
© Reuters.  Oil rises on firm short-term demand outlook; overall market still weak
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* U.S. gasoline demand seen strong in coming weeks

* Overall market conditions remain weak

* BNP Paribas (PA:BNPP) chops Brent, WTI price forecasts

By Henning Gloystein

SINGAPORE, July 11 (Reuters) - Oil prices edged up early 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 LCOc1 were at $47.13 per barrel at 0147 GMT, up 25 cents, or 0.5 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $44.64 per barrel, up 24 cents, or 0.5 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," Bank of America Merrill Lynch (NYSE:BAC) said.

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 still about 17 percent below their 2017 opening levels despite a deal led by the Organization of the Petroleum Exporting Countries (OPEC) to cut production from January.

"Traders are worried that increasing supply from Nigeria and Libya, both of which are recovering from internal conflict, will continue and further undermine the output caps agreed to by OPEC and Russia," said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

OPEC along with some other producers like Russia, but excluding the United States, agreed to hold back around 1.8 million barrels per day (bpd) of production between January this year and March 2018.

However, an over 10 percent jump since mid-2016 in U.S. production C-OUT-T-EIA 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 barrels per day (bpd) in June, 450,000 bpd more than in May and 1.9 million bpd more than a year earlier. 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 see the 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.

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