Baku, Azerbaijan, Sept.29
By Leman Zeynalova – Trend:
Brent's rally above $80 per barrel is fundamentally justified, according to the report of Fitch Solutions Macro Research (a unit of Fitch Group).
"Front month Brent is trading higher following the meeting of the Joint Ministerial Monitoring Committee (JMMC) for the OPEC+ production cut deal in Algiers on September 23. The JMMC issued a statement reiterating the group's commitment to attaining 100 percent compliance with deal; as of August, compliance stood at 129 percent. The statement urged any producers with spare capacity to help ensure that global demand can be met, but stopped short of any explicit commitment to further increase supply," said the report.
From 2019, the company sees emerging markets retake the mantle as the engine of global demand growth. "This will hold growth in positive territory, but without developed markets support, it will nevertheless slow."
Further, the report says that rising oil prices and mounting headwinds to emerging markets have increased the risks to demand over recent months.
"However, in our view, the threats to the global economy have been somewhat overblown. Our data show that, on balance, the slowdown in oil demand growth will not be sufficient to meet the fall in supply," said the company.
The improvement in sentiment largely reflects shifts in the oil market, according to Fitch Solutions.
"In contrast, broader macroeconomic conditions have grown more challenging. Much of this revolves around the escalating US-China trade dispute and fears of contagion among emerging markets, but also ties into underlying trends in oil prices, the dollar and global liquidity."
Heavy bullish positioning in Brent leaves the market heavily exposed, should risk-off sentiment spill over into oil, according to the company.
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