Oil prices move up slightly, but big recovery unlikely

Following a week full of potentially disheartening USA oil statistics, crude futures were well into the green Thursday afternoon as the dollar eased significantly by midday.

The EIA increased its USA crude output forecast for 2017 to 8.2 million barrels a day from 8.19 million projected in June, according to the monthly Short-Term Energy Outlook released Tuesday.

The US government's EIA said crude inventories fell 2.5 million barrels last week, less than a 3 million-barrel drop forecast in a Reuters poll.

In June, Angola produced 1.773 million barrels per day and Nigeria 1.523 million, according to secondary sources and 1.752 million barrels per day according to direct communication. Libyan oil may be returning to the market soon, Iran is expected to unveil new contract terms for the post-sanctions era and Canada, whose output was down by about 1 million barrels per day because of wildfires in May, is slowly returning to full production.

Brent for September settlement dropped as much as 60 U.S. cents, or 1.3 per cent, to US$46.77 a barrel on the London-based ICE Futures Europe exchange.

Oil markets tumbled more than 4 percent on Wednesday, erasing most of the previous session's gain, as a raft of bearish USA inventory data heightened concerns about a global glut.

Middle East production has climbed to a record while US output slumps, a sign that OPEC's strategy of defending market share is succeeding, the International Energy Agency said in its monthly oil market report.

"Although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices", the IEA warned.

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Brent will average $44.53 a barrel this year, up from $37.77, and average $56.25 in 2017, up from $54.25 earlier. The fuel surplus means American refiners may process less oil even as crude supplies remain more than 100 million barrels above the five-year average for this time of the year. "There is maybe a little bit of profit taking ahead of the stats", said Ben Le Brun, market analyst at Sydney's OptionsXpress.

In its latest report, the agency said global supplies of crude rose in June, by 600,000 barrels per day to 96 million bpd.

"After the drama we saw at the beginning of this year when prices were sliding daily, the fact that crude oil has in the past two months moved within a range in the high $40s per barrel should be a relief for some producers".

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