Moody's raises medium-term price band forecast for crude oil

Moody's raises medium-term price band forecast for crude oil

Moody's Investors Service today raised its medium-term price band for crude oil to Dollars 45-65 per barrel from USD 40-60 as continued OPEC-led production restraint and strong global demand growth have contributed to declining global inventories, offsetting rapid increases in United States shale production.

OPEC said in its monthly report that supply from non-members is likely to grow by 1.66 million barrels per day (bpd) in 2018, nearly double the growth it predicted in November, largely due to rising US supply.

Oil prices edged up on Wednesday after posting two days of declines at the start of the week. Output has been helped by the 25% rise in oil prices over the past year, along with improvements in efficiency and technology.

"The total USA crude, gasoline and distillate stocks have increased in eight of the past 10 weeks, raising 24 million bl in total since the start of the year". S. crude inventories are not rising as much as expected during the spring season now starting, implying healthy demand, and from strong China data. "So if inventories declined last week it will definitely be a positive turn", SEB commodities strategist Bjarne Schieldrop said.

Gasoline stockpiles, however, dropped 6.3 million barrels for the week, while distillate stockpiles lost 4.4 million barrels, according to the EIA.

Brent crude was last up eight cents at $64.72 USA a barrel, climbing from an earlier low of $64.43. A broader market slump initially drove prices lower, while surging American production and increasing inventories remain a challenge.

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Estimates by the EIA show global supplies will exceed 100 million bpd for the first time in the second quarter of 2018. U.S. West Texas Intermediate (WTI) futures were up six cents at $60.77 a barrel. The IEA will release its monthly oil report Thursday.

China reported a 7.2% year-on-year increase in industrial output in the first two months of the year, roundly beating expectations.

"The Opec report seems to illustrate that the speed of the market rebalancing is slowing", Commerzbank strategist Carsten Fritsch said.

"Unless the USA lowers production, we could see oil [in the] mid-$50s".

The oil price is still showing a 1% loss so far this week as concern grows about the ability of Opec and its partners to counter rapid growth in U.S. crude production, which is tipped to hit a record 11 million bpd before the end of the year.

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