Investing.com - Oil prices rallied sharply in North American trade on Tuesday, after the Organization of the Petroleum Exporting Countries forecast higher demand for its crude next year as the global surplus fades.
In its monthly market report published earlier, OPEC said that demand for crude from its own 14 members was expected to rise to average 33.0 million barrels per day in 2017, representing a gain of 1.1 million barrels per day over the current year.
Output from OPEC’s 14 nations increased by 264,100 barrels a day to 32.858 million a day in June, according to external sources cited by the report.
Global oil demand will increase by 1.2 million barrels a day next year to reach an average of 95.3 million a day, with almost all of the growth concentrated in emerging economies such as India and China.
The rise in demand growth would come as rival non-OPEC supply continued to fall. Oil production outside OPEC will fall by 100,000 barrels a day to 55.9 million a day, as growth in Brazil and Canada is eclipsed by declines in Mexico, the U.S. and Norway, according to OPEC.
"The contraction seen this year in non-OPEC supply is expected to continue in 2017 but at a slower pace," OPEC said. "Market conditions will help remove overall excess oil stocks in 2017."
On the ICE Futures Exchange in London, Brent oil for September delivery jumped $1.34, or 2.9%, to $47.59 a barrel by 12:40GMT, or 8:40AM ET, after rising by as much as 3.4% to a session peak of $47.87.
A day earlier, London-traded Brent futures sank to $45.90, the lowest since May 11, amid easing concerns over supply outages in Africa and the Middle East.
Elsewhere, crude oil for August delivery on the New York Mercantile Exchange rose $1.11, or 2.48%, to $45.87 a barrel. On Monday, New York-traded oil futures sank to $44.42, a level not seen since May 11, amid signs of an ongoing recovery in U.S. drilling activity.
According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. increased by 10 last week to 351, marking the fifth increase in six weeks.
The renewed gain in U.S. drilling activity fueled speculation that domestic production could be on the verge of rebounding in the weeks ahead, underlining worries over a supply glut.
Market players now looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products. The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 3.2 million barrels.