The Organization of the Petroleum Exporting Countries (OPEC) are expecting an increase in demand in 2018 due to a rise in consumption and lower supply from non-OPEC producers.
Recent low prices have stimulated consumption for drivers and stifled output, thus the cartel has predicted that demand will reach 33.1m barrels a day next year. OPEC revised forecasts by an extra 200,000 barrels per day, reasoning that robust demand and lower supplies from countries outside the cartel would help boost demand for its oil.
The group meet next month to decide whether to extend the current production cuts beyond March of next year. It is largely expected that OPEC and its allies will continue with the pact to reduce output.
Oil has risen by over 4% this week on the back of the speculation that there will be an extension of the production cuts.
Meanwhile, OPEC leader, Saudi Arabia, announced that it will reduce the amount of crude allocated for sale in November. It is also rumoured that the participants in the oil coalition will expand, welcoming new nations into the deal.
OPEC have been on damage control since the price of oil plunged below the $100 mark in 2014, thanks to excess demand and the rapidly expanding US shale industry.
Recently, oil prices lost momentum after a report showed an increase in US crude stockpiles. The data showed inventories grew by 3.1m barrels last week. Investors will be looking to today’s crude oil storages report for confirmation. It will be the seventh week US inventories have risen if the report is correct.
We’ve seen the value of the international benchmark, Brent oil, grow by over a quarter since June thanks to the cuts and better-than-expected consumption.
Some defiant OPEC members have continued to increase output as prices rise and are wary that if prices rise above $60, more oil producers will turn on their oil rigs and diminish OPEC’s efforts to curtail prices.
OPEC members, Nigeria and Libya are exempt from production cuts due to internal struggles. These nations, along with Iraq, have continued expand their oil production.
Additionally, a strong economic backdrop has enabled the price of oil to rise as demand has not been hindered by economic growth prospects.
Crude oil inventories will be released at 16:00 (GMT+1)
National gas inventories will be released at 15:30 (GMT+1) – Natural gas storages have been known to shift the price of oil significantly, so watch out for any strong movements.