Economy

OPEC again raises demand for its oil, points to 2018 deficit

OPEC again raises demand for its oil, points to 2018 deficit

Saudi Arabia and Russian Federation helped secure a deal between the Organization of the Petroleum Exporting Countries and 10 rival producers to cut output by about 1.8 million barrels per day (bpd) until the end of March 2018 in an effort to reduce a glut.

OPEC, Russia and other non-member producers are cutting output by about 1.8 million barrels per day (bpd) until next March to get rid of a price-sapping supply glut.

Brent crude futures LCOc1 rose 33 cents, or 0.6 percent, to settle at $56.94 per barrel. It said that Aramco planned to supply 7.15 million barrels a day, "despite a very strong demand", which exceeds 7.7 million barrels a day.

Libya's goal of boosting oil production to 1.25 million bpd by year-end will be hard to achieve, the chairman of state oil firm NOC said.

In a further sign that the supply excess is easing, OPEC said inventories in developed economies declined by 24.7 million barrels in August to 2.996 billion barrels, 171 million barrels above the five-year average. Growth in USA shale three years ago contributed to the global excess OPEC's cut is now targeting.

Barkindo said the effort in part helped the energy sector emerge from the "most vicious of all oil cycles", with oil prices tanking below $30 per barrel previous year on oversupply concerns. "A rise above that level would encourage USA oil producers to expand their drilling activities, otherwise the lower prices could lead to a reduction in their capex".

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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.

Increasing demand for oil will be matched by added supplies, but Opec's forecasts for the balance of supply and demand foresee a greater reliance on the cartel's output.

After settlement, crude prices pared gains when the industry group the American Petroleum Institute said its data showed US crude stocks rose unexpectedly last week, while gasoline inventories decreased and distillate stocks built.

Haworth said the market and OPEC are "hoping USA producers slow down production and make further progress on inventory cuts".

Should OPEC keep pumping at September's level, the market could move into a deficit next year, the report indicates.

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


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