Oil recovery edges closer as global demand climbs
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.