July 12 (UPI) -- A good report on U.S. economic potential and forecasts for dwindling production from American shale helped push oil prices higher in early Wednesday trading.
"The economy appears to have grown at a moderate pace, on average, so far this year," U.S. Federal Reserve Chairwoman Janet Yellen said in prepared remarks. "Although inflation-adjusted gross domestic product is currently estimated to have increased at an annual rate of only 1.5 percent in the first quarter, more-recent indicators suggest that growth rebounded in the second quarter."
The U.S. Commerce Department in its last estimate, published June 29, said first quarter growth in gross domestic product was 1.4 percent, an increase from the previous estimate of 1.2 percent. First quarter growth was still lower than the 2.1 percent recorded during the fourth quarter. The oil and gas extraction sector added less than 1,000 jobs from May and employment in that sector is relatively unchanged from last year.
Crude oil prices, which recovered from a rough start Tuesday to rally for gains, saw continued momentum in early Wednesday trading. The price for Brent crude oil was up 1.6 percent at 9:10 EDT to $48.29 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 1.9 percent to $45.92 per barrel.
Crude oil prices got a life Tuesday following a report from the U.S. Energy Information Administration that said U.S. crude oil production for the year should average 9.3 million barrels per day in 2017 and 9.9 million barrels per day next year. The 2018 forecast was a downward revision and follows a steady string of declines for Brent and WTI, which have struggled to gain ground on $50 per barrel for most of the second quarter.
EIA releases its much-watched inventory report mid-way through morning trading. In its monthly market report for July, the Organization of Petroleum Exporting Countries said market balance, reflected in part by the EIA's report, was pushed back into 2018.
OPEC is struggling to build momentum for a multilateral effort to balance the market through managed production declines. Libya and Nigeria, two members exempt from the agreement so they can steer oil revenue to national security efforts, added nearly a quarter-million barrels per day to the market between May and June.
"OPEC news remains mixed, with Saudi Arabia raising production while reducing exports to meet increased domestic demand," Ole Hanson, the head of commodity strategy at Saxo Bank, told UPI. "Iran is taking aim at 4 million barrels per day, which would be above its production cap."
By his read, the short-term gains for oil will only be significant if WTI breaks through $47 and change. EIA in its report said it expected WTI to average $49 per barrel this year, $2 per barrel less than its previous estimate.