TOKYO- Oil prices edged higher on Thursday with the market mood switching to relief as OPEC forecast a supply deficit next year, from doom and gloom over data showing a surprise increase in US crude inventories.
Brent futures rose 24 cents, or 0.4 percent to $63.96 a barrel, after skidding 1 percent on Wednesday on the US stocks build-up.
West Texas Intermediate crude was down 10 cents, or 0.2 percent, at $58.85 a barrel, following a 0.8 percent drop the previous session.
The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought – even before the latest pact with other producers to curb supply takes effect.
The revised forecast by OPEC marks a further retreat from a prediction of a glut in 2020 as US production growth begins to slow.
Still, US inventories are on the rise. Crude stockpiles last week rose unexpectedly, gaining more than 800,000 barrels, compared with a Reuters poll that forecast a 2.8 million barrel decline.
Inventories of petroleum products also increased with gasoline stocks surging by more than 5 million barrels and distillates gaining a bit over 4 million barrels – with both more than double expectations.
“The overall report was very bearish as demand fell off a cliff and total stockpiles climbed to the highest level in seven months,” said Edward Moya, senior market analyst at OANDA.
Beyond the balance between inventories and supply, investors are also awaiting news on negotiations between Washington and Beijing to end a long-running trade war and get an agreement before another round of US sanctions kicks in.
The lingering battle between the world’s two biggest economies has hit global growth, in the process denting demand for crude and oil products.
US President Donald Trump is expected to discuss tariffs on Chinese goods set to be imposed on Dec. 15 with top trade advisers as markets brace for fallout in China’s reaction.
“In the near-term, US-China trade remains the primary catalyst and the 500-pound gorilla in the room,” said Stephen Innes, chief Asia market strategist at AxiTrader.
The report showed OPEC production falling even before the new deal takes effect.
In November, OPEC output fell by 193,000 bpd to 29.55 million bpd, according to figures the group collects from secondary sources, as Saudi Arabia cut supply.
Saudi Arabia told OPEC it made an even bigger cut in supply of over 400,000 bpd last month. The kingdom had boosted production in October after attacks on its oil facilities in September briefly more than halved output.
The November production rate suggests there would be a 2020 deficit of 30,000 bpd if OPEC kept pumping the same amount and other factors remained equal, less than the 70,000 bpd surplus implied in November’s report and an excess of over 500,000 bpd seen in July. – Reuters