Oil stocks to buy ahead of next OPEC meeting

Gladys Abbott
October 12, 2017

OPEC forecast higher demand for its oil in 2018 on Wednesday and said its production-cutting deal with rival producers was getting rid of a glut, pointing to a tighter market that could move into a deficit next year.

Oil producers are succeeding in re-balancing an oversupplied market, though they may need to take further steps to sustain the recovery into 2018, OPEC Secretary-General Mohammad Barkindo said.

Barkindo stressed, however, that the oil market is a global one.

"I think the market is able to absorb that 2 million bpd of US exports easily", Glencore's head of oil trading Alex Beard told the Reuters Global Commodities Summit.

Russian Federation and several other producers have cut production by about 1.8 million barrels per day since the start of 2017. "Between the first half and second half this year, demand growth is nearly about 2 million barrels (per day), which is very robust", he said.

Brent crude futures, the worldwide benchmark for oil prices, were up 6 cents, or 0.1 percent, at $55.85 a barrel.

OPEC and its allies want to bring stocks down to the five-year average and are discussing extending their supply restraint.

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Prices drew support when the International Monetary Fund projected global economic growth of 3.6 percent this year and 3.7 percent for 2018, indicating fuel demand would rise.

The report also cited headwinds in 2018 for an expansion of supplies in USA shale, such as lower drilling efficiency and cost inflation. Oil prices have crashed to Dollars 50s now, from the high of USD 147 per barrel in 2008.

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

Opec said it pumped 32.75 million bpd in September, up about 89,000 bpd from August. But analysts at JPMorgan said this was less of an issue, saying "concerns that OPEC compliance would fade into the fourth quarter now appear unfounded".

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

The figures mean Opec has complied 98 per cent with the cutback pledge, according to a Reuters calculation, up from 83 per cent initially reported in August as the September rise was led by Nigeria and Libya which are exempt from the cut.

Read: What happens if OPEC maintains current levels of production?

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