At least 3-month OPEC deal extension necessary to uphold demand

Baku, Azerbaijan, Sept.21

By Leman Zeynalova – Trend:

If OPEC decides not to extend its agreement by at least 3 months, demand will likely struggle to catch up with supply, Christopher Haines, head of oil and gas at BMI Research, (a Fitch Group company) told Trend.

“Stronger demand is the best way to get out of a glut, but that will only sustain if the price is right. Global growth is looking better in 2017, though the oil supply side of the market still remains strong,” he said.

Spencer Welch, director of the oil markets and downstream team in the London-based IHS Markit for his part, told Trend that ultimately, in the long term demand rules.

“When no one needs oil anymore then the oil industry is finished. However, people will still be using oil well into the 22nd century, albeit at a lower levels than today because of efficiency improvements and fuel substitution,” he believes.

Welch noted that in the short-term (next 5 years) supply and demand are equally important for the oil industry in terms of setting the market price.

“Currently global demand for oil is still growing strongly, by around 1.5 million barrels per day every year. So the world’s thirst for oil is still strong and the future of the oil industry is healthy for a good while yet,” he added.

OPEC said in its September Oil Market Report that in 2017, world oil demand growth was revised higher by around 50,000 barrels per day (b/d),

The upward revision is a result of better–than-expected performance from OECD (Organization for Economic Co-operation and Development ) America and Europe in 2Q17, according to the report.

“Hence, world oil demand growth is now pegged at 1.42 million b/d, with total global consumption at 96.77 million b/d,” said the cartel.

World oil demand growth for 2018 was also revised up by around 70,000 b/d from the previous month’s report; it is now anticipated to be 1.35 million b/d, with total global consumption of around 98.12 million b/d.

This reflects higher growth expectations for OECD Europe and China, according to the report.

Based on the latest available data, OECD oil demand growth was revised upward for the second consecutive month by 60,000 b/d to average 0.37 million b/d.

Oil demand has been quite robust in 2Q17, particularly in the Americas and Europe, said the cartel.

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Follow the author on Twitter: @Lyaman_Zeyn

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