Investing.com -- Crude futures surged more than 4%, bouncing from near two-month lows, after OPEC predicted in its first 2017 forecast that the demand for global oil will exceed production levels of crude next year, helping ease investors' sentiments regarding the long-term implications of a massive supply glut on worldwide energy markets.
On the New York Mercantile Exchange, WTI crude for August delivery traded between $44.52 and $46.92 a barrel before closing at $46.76, up 2.00 or 4.47% on the session. It came one day after the front month contract for U.S. crude tested the $45 handle, plunging to its lowest level since early-May. On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $46.03 and $48.47 a barrel, before settling at $48.40, up 2.15 or 4.65% on the day.
In its monthly Oil Market Report for June, released on Tuesday, OPEC said its crude oil production averaged 32.86 million barrel per day in June, representing an increase of 264,000 bpd from the prior month. Although output increased among a host of producers such as Nigeria, Iran, Saudi Arabia, Libya and UAE, production dipped considerably in Venezuela and Iraq. Oil production in Saudi Arabia, the world's largest exporter, rose by 66,500 bpd to 10.308 million bpd. The assessment also factored in the return of Gabon to the powerful oil cartel, adding an extra 214,000 bpd to June's total.
Notably, OPEC anticipates that world demand will increase by 1.2 million bpd next year to 95.3 million bpd, outpacing current supply estimates. OPEC also forecasts that world supply will fall sharply by 1.4 million bpd to 94.3 million bpd during the current three-month period, providing significant pressure to the upside. Additionally, the cartel anticipates that Non-OPEC supply will inch down from current 2016 forecasts of 56.0 million bpd to 55.9 million bpd by the end of next year.
"The contraction seen this year in non-OPEC supply is expected to continue in 2017 but at a slower pace," OPEC said in the report. "Market conditions will help remove overall excess oil stocks in 2017."
OPEC also attributed a 40% increase in the average price of its Reference Basket during the second quarter to widespread production slowdowns in Nigeria and Canada, as well as the determined recovery of markets in the wake of the Brexit referendum. The massive rebound marked OPEC's largest quarterly spike on record.
"With ongoing supply disruptions around the world seeming to provide a floor to prices, international crude futures rose on both sides of the Atlantic in June, shrugging off the results of the UK’s referendum on EU membership," OPEC added.
Crude prices have still fallen sharply over the last two years from their peak of $115 a barrel in June, 2014. Months later, OPEC rattled global markets with a surprising decision to maintain its production ceiling above 30 million, abandoning its strategy for favoring price increases over market share. The tactic triggered a prolonged battle with U.S. shale producers for market control, flooding energy markets with excessive supply.