Oil prices rose on Tuesday, lifted by healthy economic growth as well as the ongoing supply curtailments by a group of exporters, including OPEC and Russia.

Brent crude futures were at $69.38 a barrel at 0756 GMT, up 35 cents, or 0.5 per cent, from their last close, not far off the three-year high of $70.37 reached on January 15. US West Texas Intermediate (WTI) crude futures were at $63.93 a barrel, up 36 cents, or 0.6 per cent, from their last settlement. WTI rose to its highest since December 2014 on January 16 at $64.89.

IMF growth forecast

Traders said oil markets were generally well supported by healthy economic growth. The International Monetary Fund (IMF) had on Monday revised upward its forecast for world economic growth in 2018 and 2019, to 3.9 per cent for both 2018 and 2019, a 0.2 percentage point increase from its last update in October.

The “economic outlook and seasonally colder weather has led to firmer oil demand growth, facilitating the continuation of a fall in oil inventories towards OPEC's recent five-year average target,” BNP Paribas said in a note.

OPEC-led supply curbs

This growth, which is also translating into more oil consumption, comes at a time of supply curbs by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which began in January last year and are set to hold throughout 2018.

“The outlook for 2018 is roughly balanced for most of the year, but inventories are set to rise in Q4'18,” the French bank said, adding that it has hiked its 2018 oil price forecasts by $10 a barrel and expects WTI to average $60 and Brent $65.

But there have also been signs of a possible price correction. Crumbling refinery profits, first in Asia and now also in Europe and the United States, as a result of rising feedstock prices and plentifully available fuel products, point to lower crude orders going forward.

Barclays said it expected Brent to average $60 per barrel this year. While that is $5 above its previous forecast, due to strong demand growth and falling output from OPEC-member Venezuela, the British bank said it had “a bearish view on oil prices for the quarters ahead''.

Peak oil demand

In the long-term, investors are preparing for a decline in oil demand coming from the rise of electric vehicles. Bank of America Merrill Lynch said in a note this week it saw “peak oil demand by 2030 on electric vehicles... (and that) electric vehicles will have replaced conventional (vehicles) by 2050.”

The bank also said that “when gasoline demand peaks by 2025 (and total oil by 2030), refinery utilisation rates may decline permanently and refining margins suffer heavily.”

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