Refineries heat up but oil demand outlook cools

Oil inventories are declining as refiners pick up the pace of processing, but lower expectations for 2017 growth resulted in a mixed outlook for the global commodity.

The International Energy Agency projected Thursday that global refinery processing would increase by 2.2 million barrels per day to 80.6 million, an all-time high. More demand from refineries helps slash oil inventories, potentially bolstering prices.

But the report also predicted lower growth in oil demand in 2017 than previously expected, limiting the commodity's upside in trading Thursday.

The agency predicted that global oil demand growth would fall from 1.4 million barrels per day in 2016 to 1.2 million in 2017, or 100,000 barrels fewer than the IEA's previous forecast "due to a dimmer macroeconomic outlook."

The price of West Texas Intermediate oil, the U.S. benchmark crude, rose 1.4% to $43.13 per barrel at 11:10 a.m. Thursday. Brent crude oil prices, representing the global benchmark, rose 1.5% to $45.52.

Daily supply and demand is finally balancing out after a prolonged stretch defined by a global glut of production that has depressed prices over the last two years. The IEA said "balances show essentially no oversupply during the second half of the year."

In any case, the Organization of the Petroleum Exporting Countries is still expected to hold an informal meeting in September to discuss the possibility of a production freeze aimed at stabilizing prices.

Saudi Arabia, OPEC's largest producer, pumped an all-time record high 10.7 million barrels per day in July.

Oil has charted a volatile path in 2016, briefly falling below $30 in February before topping $50 in May and then dropping below $40 momentarily last week.

Follow Paste BN reporter Nathan Bomey on Twitter @NathanBomey.