Oil nears $49 as brighter demand outlook sparks optimism

US Hurricanes Affecting Oil Prices, Saudi Could Cut Output

"Irma will have a negative impact on oil demand but not on oil production or processing".

On Tuesday, oil prices dropped as the aftermath of Hurricane Irma affected demand offset refinery restarts on the heels of Hurricane Harvey. A Reuters survey estimates that Saudi Arabia's crude oil production fell by 40,000 bpd (barrels per day) to 9.98 MMbpd (million barrels per day) in August 2017-compared to the previous month.

Looking at supply side fundamentals, OPEC output fell by 170,000 bpd in August to 32.68 mbpd on the back of improved compliance from members and fluctuating output from Libya.

Meanwhile, the Energy Information Administration will report weekly US crude stockpile and production data at 10:30 a.m. Wednesday.

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USA gasoline prices fell despite a record drawdown in fuel inventories.

USA crude futures rose 0.9% to $48.68 per barrel.

Analysts at Drillinginfo.com noted that for oil to rally and hold those gains, the IEA's demand projections have to pan out, along with the ongoing supply cuts, to help inventories fall.

OPEC and non-OPEC producers, including Russian Federation, have agreed to cut output by 1.8 million barrels per day until next March in a bid to decrease global oil inventories and to support oil prices.

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Traders and analysts surveyed by The Wall Street Journal expect on average to see USA oil stockpiles to have risen by 3.7 million barrels in the week ended September 8.

"There will be some demand lost - obviously Florida is a big gasoline demand center", Amrita Sen, chief oil analyst at consultants Energy Aspects, said in a television interview.

Refinery crude runs fell by 394,000 barrels per day, EIA data showed.

The assessment echoed a report by OPEC forecasting higher demand for its oil in 2018 and pointing to signs of a tighter global market. The cartel hopes to prop up struggling oil prices by reducing the global supply glut. It has expected the US economic growth to stay unaffected due to Hurricane Harvey, considering the offset of economic activity loss caused by the reconstruction work along the Gulf Coast. "There is a need to consider how we place our stocks, where we place our stocks and the combination of crude oil versus products is an issue that we need to pay attention to", he said when asked if the United States should reconsider moving its fuel stocks.

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"OECD commercial stocks were unchanged in July at 3.016 billion barrels, when they normally increase", the IEA said.

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