Oil re­cov­ery edges closer as global de­mand climbs

The Daily Telegraph - Business - - Business - By Jil­lian Am­brose

THE Or­gan­i­sa­tion of Petroleum Ex­port­ing Coun­tries (Opec) has raised its ex­pec­ta­tions for global oil de­mand next year, say­ing the greater than ex­pected growth could fi­nally erode the chronic mar­ket over­sup­ply.

The car­tel’s lat­est monthly report shows its third con­sec­u­tive up­ward re­vi­sion for oil de­mand, in a sign of grow­ing con­fi­dence that oil prices will re­cover. The group said its deal with other ma­jor oil pro­duc­ers to cut the glut of oil that dragged prices to 12-year lows in 2016 had al­ready be­gun to bring the mar­ket back into bal­ance.

At the same time, global de­mand next year is set to rise to 33.06m bar­rels a day, which is 230,000 higher than its pre­vi­ous forecast.

The report has emerged af­ter steadily ris­ing oil mar­ket prices this month. The cost of a bar­rel of Brent crude reached $59.50 ear­lier this month, and is cur­rently trad­ing at around $56.70 per bar­rel.

“Sen­ti­ment has turned pos­i­tive again on re­newed hopes that sup­ply of oil will re­duce in the com­ing months,” said Fawad Raza­qzada, an an­a­lyst at forex. com.

Saudi Ara­bia, the world’s big­gest oil ex­porter, is to re­duce its ex­ports by 560,000 next month, down to 7.15m bar­rels a day.

In ad­di­tion, Opec has in­di­cated that the sup­ply cuts will need to be ex­tended next year, and its mem­bers have called on US shale oil pro­duc­ers to fol­low suit.

“Although it is ques­tion­able if any US oil pro­duc­ers will ac­tu­ally lis­ten to them, the fact that Rus­sia and a few other non-Opec mem­bers are con­tin­u­ing to com­ply with the Saudi-led sup­ply cuts sug­gests there is a strong con­sen­sus among oil pro­duc­ers to do what­ever is needed to shore up prices, as this would be good for all par­ties in­volved,” Mr Raza­qzada added.

The 14-strong group of the world’s largest oil states, which have agreed to keep a lid on oil ex­ports, have in­creas­ingly stuck to their quo­tas, ac­cord­ing to an­a­lysts at Thom­son Reuters.

The an­a­lysts es­ti­mate that the rate of com­pli­ance has climbed to 98pc, up from the level of 83pc recorded back in Au­gust.

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