Oil rises two percent on signs rebalancing underway

Jon Howard
October 12, 2017

"Emerging from this most vicious of all oil cycles, the need to sustain the rebalanced market in the medium- to long-term, some extra-ordinary measures could be considered by countries participating in "the Declaration of Cooperation", including expanding the membership", Barkindo said in a speech at the India Energy Forum in New Delhi.

In a deal aimed at clearing the glut, OPEC is curbing output by about 1.2 million bpd, while Russian Federation and other non-OPEC producers are cutting half as much, until March 2018.

Brent crude futures, the global benchmark for oil prices, were up 6 cents, or 0.1 percent, at $55.85 a barrel. Last month, it expected a 590,000 bpd year-over-year increase to 9.84 million bpd.

But with strong oil demand growth, summer demand, and Brent futures flipping to backwardation, the OECD commercial stocks have started to draw down faster in the summer.

Barkindo stressed, however, that the oil market is a global one. The production cuts have led to a decline in crude inventories and a better balance in the oil market, he said.

Oil prices rose for the third day on Wednesday as OPEC forecast higher demand for 2018 and heightened tensions in Kurdistan supported prices.

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"The supply forecast for next year will be revised downward if higher oil prices and lower costs do not materialize", the report said. OPEC does not issue price forecasts.

Oil prices have been rising since the end of summer, but remain well below their 2014 level.

US output was curtailed during last year's market downturn, though shale oil production in general has been more resilient to lower crude oil prices than anticipated.

Rob Haworth, senior investment strategist at U.S. Bank Wealth Management said OPEC and oil bulls were "hoping U.S. producers slow down production and make further progress on inventory cuts".

OPEC's reluctance to cut output was also seen as a key reason behind the fall.

Top producer Saudi Arabia told OPEC it pumped 9.973 million bpd in September, up about 22,000 bpd from August and still below its OPEC target of 10.058 million bpd. Should Opec keep pumping at similar levels to September, the market could move into a deficit next year, the report indicates.

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