Oil edged higher on Tuesday, supported by strong demand, expectations of a drop in U.S. crude inventories and an OPEC-led deal to extend oil output cuts.
Brent crude was up 19 cents at $62.64 a barrel at 10:49 a.m. ET (1549 GMT) while U.S. crude, known as West Texas Intermediate, rose 2 cents to $57.49.
“Demand remains firm which is the main reason for us to still see oil at above $60 per barrel,” said Head of Research at Marex Spectron, Georgi Slavov, .
Faster-than-expected growth in demand this year has given tailwind to OPEC’s efforts to clear the glut and the latest U.S. inventory reports are likely to show a third straight weekly drop in crude stocks.
Analysts expect data from industry group American Petroleum Institute (API) and the government’s Energy Information Administration (EIA) to show crude stocks fell 3.5 million barrels last week.
The API report is out at 4:30 p.m. (2130 GMT), followed by the government supply report on Wednesday at 10:30 a.m.
Analysts looking ahead to next year believe some tightening in supply will continue to take place. Morgan Stanley analysts said in a note on Monday they expect demand to outpace supply in 2018, with most of the growth in supply coming from the United States and Canada.
Separately, Goldman Sachs late Monday raised its forecast for 2018 Brent and WTI to $62 and $57.50 a barrel, respectively, thanks to OPEC’s resolve in maintaining production cuts.
The Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers last week extended the deal to cut output by 1.8 million barrels per day (bpd) until the end of 2018 to get rid of excess oil in storage.
OPEC has shown strong compliance with the supply cut pledge and in November output fell by 300,000 bpd to its lowest since May, according to a Reuters survey.
Concerns that the OPEC-led producer group’s Nov. 30 decision to extend their supply-cutting deal could bolster U.S. shale drilling limited gains, however.
Data last week showed U.S. crude output rose to nearly 9.5 million bpd in September, approaching the high of 9.63 million bpd seen in 2015.
“U.S. output will play the most significant role on the supply front in 2018,” said PVM’s oil broker, Tamas Varga .
“A jump above $60 in WTI could easily push U.S. production over the 10 million bpd mark, increasing the non-OPEC forecast and capping further attempts to push prices higher.”