Is $71 as good as it gets for oil?

LONDON: On the surface, things look good for oil producers. Global oil demand is set to grow at its fastest pace in three years and Opec’s discipline in sticking to output cuts has been unprecedented.

All of this should help offset booming US production.

But there are a few tell-tale signs in the oil market that paint a less rosy picture.

After shrinking consistently for months, global oil stocks began rising again at the start of this year.

But even before it became apparent that inventories had increased, the oil futures market flipped into a structure that usually reflects the perception that supply is greater than demand — known as contango, when currentmonth prices are weaker than forward prices.

The International Energy Agency and the Organization of the Petroleum Exporting Countries this week reported an increase in global inventories, which declined for seven months in a row, thanks to Opec’s coordinated 1.8-million-barrels-per-day joint production cut with other major exporters such as Russia.

The IEA, Opec and the US Energy Information Administration, the third major forecasting body, have all underestimated the growth in production outside of Opec and specifically, the United States.

For the first time since the effects of Opec’s production cut kicked in around mid2017, the three agencies are predicting the global oil market will face a surplus in 2018.

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THE IEA, OPEC AND THE US ENERGY INFORMATION ADMINISTRATION, THE THIRD MAJOR FORECASTING BODY, HAVE ALL UNDERESTIMATED THE GROWTH IN PRODUCTION OUTSIDE OF OPEC AND SPECIFICALLY, IN THE UNITED STATES