An accelerating decline in global crude inventories and expectations for an uptick in global demand growth has caused analysts to revise their Brent oil price forecasts upwards for the first time in six months, a Reuters survey has shown in August. The poll was carried out before Hurricane Harvey hit US shores, curtailing US refining by a fifth and disrupting offshore production.
The monthly poll of 33 analysts and economists projected Brent crude to average $52.53 a barrel in 2017, slightly higher than last month's forecast of $52.45. Until July this year, analysts have been lowering their forecasts every consecutive month since February.
For 2018, the North Sea crude was seen averaging $54.48 a barrel, versus previous month's forecast of $54.51. Brent has averaged about $52.15 per barrel so far this year. The International Energy Agency said earlier this month global oil demand would grow more quickly than expected this year, helping to ease a glut despite rising crude production from North America and weak Opec compliance with output cuts.
"Historically inventories in the US are still quite high. But, the withdrawals are definitely a sign for strong demand," said Frank Schallenberger, head of commodities research at Stuttgart-based Landesbank Baden-Wuerttemberg. US crude inventories fell by 3.3 million barrels in the week ending August 18, to 463.17 million barrels, down 13.5 percent from their record levels last March.
The withdrawal in US crude stocks is seen accelerating the market rebalancing targeted by the Opec production cuts initiated earlier in the year, analysts said. However, some think the inventory drawdown will likely ease. "We believe the focus is set to shift away from US crude inventory draws, not least as these withdrawals are less likely to continue, because of the coming seasonal soft patch and wrap-up of the driving season," said Norbert Rucker, head of commodity research at Swiss bank Julius Baer.
Opec producers including Russia have pledged to hold back about 1.8 million barrels per day (bpd) of output between January this year and March 2018 in order to tighten supplies and prop up prices. Concerns about high production from the United States could hinder price recovery and delay rebalancing.
"With US continuously pumping more output, we expect the temporary impact of falling inventory to fade away in the upcoming months, thereby delaying market rebalance," said Rahul Prithiani, director at CRISIL Research. The poll forecast US light crude will average $50.01 a barrel in 2017 and $51.92 in 2018. WTI has averaged about $47.29 so far in 2017. OCBC had the highest 2017 Brent forecast at $57 per barrel, while Oxford Economics had the lowest at $48.34.
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