Brent crude is hovering above $55 on the prospect of stronger demand

Courtney Goldsmith
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Oil prices were buoyed by a forecast of strong demand and shrinking inventories (Source: Getty)

Brent crude prices have steadied above $55 a barrel after gaining ground yesterday on a report by the International Energy Agency (IEA) that predicted stronger demand for oil.

Global benchmark Brent crude prices were down 0.11 per cent at $55.10 per barrel, while West Texas Intermediate (WTI) crude was 0.08 per cent up at $49.34 per barrel.

The Paris-based IEA yesterday lifted its global oil demand growth estimate to 1.6m barrels per day (bpd) from a previous estimate of 1.5m bpd and said global oil inventories were tightening.

"The news was taken as confirmation of the prevalent supply tightening narrative, i.e. that the oil surplus is slowly disappearing," said Norbert Rucker, head of macro and commodity research at Julius Baer.

"However, we believe that the news is largely backward-looking and mainly confirms what the timely and accurate official US statistics had been revealing throughout the summer: strong fuel demand and declining crude oil storage.

"Instead, the focus should be on the near-term outlook. The oil market enters a soft patch as the summer driving season wraps up and hurricanes Harvey and Irma more negatively impact demand than supply."

Rucker anticipated oil prices will trade at the upper end of a "fundamentally justified" price range.

Read more: Oil prices rise as global inventories decline on strong demand

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