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WTI prices closed in on $52 a barrel on Monday as OPEC reported record compliance to its 10-month old output reduction agreement. A slowdown in North American drilling coincided with the industry cartel’s announcement, which propped up hopes of a shrinking oil supply glut.
A Saturday statement by the Organization of Petroleum Exporting Countries (OPEC) showed that member countries, along with its NOPEC partners (Russia and the like) had been keeping up with their commitments from last November. The countries reached a 120 percent compliance rate in September, the bloc said.
“The lower U.S. rig count number, the OPEC compliance number and the geopolitical headlines from northern Iraq and Iran on sanctions have helped futures higher,” Ole Hansen, head of commodity strategy at Saxo Bank told World Oil. “But there are signs the market could be weakening with the seasonal refinery demand slowdown.”
Glencore Plc, Gunvore Group Ltd. and Trafigura Group Pte are all bullish on the future of oil prices, Bloomberg notes, estimating that prices will exceed $60 by late in 2018. Trafigura is particularly optimistic, noting that OPEC cuts and surging demand will allow market rebalancing in 2018, while a lack of new production due to cuts in capital expenditure will bring a shortage to the market by 2019, lifting prices further.
Trafigura’s co-head of group market risk Ben Luckock declared an end to “lower for longer” in September, noting that surging demand in India would drive global demand and squeeze supplies by 2020.
But the Vitol Group remains bearish. CEO Ian Taylor sees Brent falling to $45 in 2018. Production in the U.S. has increased from 8.9 million bpd in January 2017 to 9.48 million in October, according to the Energy Information Administration, which expects it to rise still further in early 2018, possibly exceeding 10 million bpd.
By Zainab Calcuttawala for Oilprice.com