IEA raises 2017 global oil demand forecast to 100000 bpd

Jon Howard
January 20, 2017

Given that oil consumption in Asia-Pacific is rapidly rising, a decline in production will keep imports elevated, said Virendra Chauhan, an energy analyst at the firm. Oil bulls are betting OPEC will stick to the script. Consultancy Energy Aspects expects compliance rates of around 80 percent but getting Iraq to adhere to the quota will be challenging. With lower oil prices, the exuberance of 2012- 2014 was finally reigned in.

Oil has drawn support from top crude exporter Saudi Arabia's commitment to cut output under the agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other producers.

The arrival of driving season in the Northern Hemisphere helped prices recover to $50 by July, but historically low global demand kneecapped any further recovery, as prices floundered between the $40 to $50 range for the remainder of the year.

Earlier this month, WTI gained sharply against Brent for some contracts in future years, amid speculation that a Republican president and a Republican-controlled Congress would agree on a tax proposal.

Libya and Nigeria are exempt from participating in OPEC's production cut plans.

In an appearance on Wednesday, Ms. Yellen said the US economy was getting closer to running on its own, but soothed some nerves by adding that it made sense to raise interest rates gradually.

On that basis, the market is likely to remain rangebound with our view that the risk is still skewed to the downside.

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"As we turn the page on 2016, it is ... becoming clear that the USA shale industry is coming out of the downturn fitter than initially anticipated", the IEA said in its Oil Market Report.

Some analysts, though, say OPEC has little choice going forward, given the economic damage incurred on the group's members during the price rout. The low price environment destroyed returns, bankrupted weak companies, and abruptly halted the Shale revolution; geographically, most of shale production shriveled to a mere handful of counties.

The end result could be higher prices in the near-term, but a renewed downturn in prices as USA shale comes back.

In addition to China, supply from the Asia-Pacific region is expected to fall over the next several years due to poor oil infrastructure investment.

There is concern that U.S oil producers will once again hamper price appreciation by flooding the market with crude.

"What the market has to fear the most in Q1 is the market itself", said Saxo Bank's head of commodity strategy Ole Hansen. Drilling activity is rising quickly - in December, the USA saw the largest monthly increase in the rig count in more than two years.

"There is a lot of length that has been added to the market, ' BNP's Tchilinguirian added".

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