Oil prices rose Wednesday, following a report from the International Energy Agency (IEA) that global demand in 2017 will rise by more than previously expected. At the same time, production has fallen on a number of issues, which will work to bring the balance of supply and demand closer.
The price of Brent crude oil and West Texas Intermediate (WTI) oil, were both buoyed by the news.
In the IEA’s September report, the Paris-based organisation said it now anticipates global demand for oil to rise to 1.6 million barrels per day (mb/d). That’s up from its August estimate of 1.5 mb/d and a forecast of 1.4 mb/d, in the July IEA report.
Not only has demand for oil across Europe and the US increased, but a number of factors relating to the production of the commodity, have also played a part.
The supply of oil has been hit by unplanned outages combined with scheduled maintenance in Libya - a member of Organisation of Petroleum Exporting Countries, or OPEC.
Output from some non-OPEC member oil producing countries, including, Kazakhstan, Mexico, Azerbaijan, Russia and in the North Sea, was also lower due to maintenance and outages – both scheduled and unexpected.
In addition, Hurricane Harvey has hampered oil production during August and the first weeks of September. The IEA said this disruption would assist a speedier rebalancing between the supply and demand of oil.
The fall in production was the first in four months and follows hot on the heels of OPEC’s recent decision to slow production. While the decline in production and increase in demand is working to raise prices, it follows an extended period of over-supply of oil.
Looking at oil shares in the stock markets, investors were positive. BP and Royal Dutch Shell shares both advanced in the FTSE 100.
In its report, the IEA also stated that OPEC crude oil production would need to be 32.7 mb/d for the remainder of 2017 – in line with current production levels. It added it would need to fall further in 2018, to 32.4 mb/d.