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Published: Wed, November 09, 2016
Economy | By Melissa Porter

OPEC Raises Oil-Demand Forecast on Outlook for Cheaper Crude

OPEC Raises Oil-Demand Forecast on Outlook for Cheaper Crude

Benchmark Brent crude and West Texas Intermediate were both down approximately 0.5%, trading at around $45.91 and $44.65, respectively, at 9 a.m. Prices continued falling but rebounded in midday trading, with WTI up 0.51% to $45.12 and Brent up 0.09% to $46.19.

In its global outlook report, OPEC said Tuesday demand for its crude oil should improve as the economy stabilizes. Still, output won't match 2015, which was the biggest year for US production in 35 years.

In physical oil markets, USA pipeline companies with operations at the heart of the country's commercial oil industry at Cushing, Okla., restarted on November 7 after an quake triggered safety shutdowns.

The group meets on November 30 and has pledged to reach a deal on cutting output to boost prices.

Brent crude's premium to U.S. futures declined to its lowest level in nearly five months on Tuesday as the global benchmark weakened relative to the U.S. West Texas Intermediate (WTI) contract due in part to projections of record OPEC output. That's 400,000 barrels a day less than its last annual estimate but still a daily 16 million barrels more than at present.

Global oversupply and stagnating demand have caused oil prices to plunge from $115 per barrel in June 2014 to less than $30 per barrel in January 2016. That's 140,000 more barrels per day than the department estimated just a month ago. They also raised their price forecast for demand in 2018, 2019 and 2020, when they see demand reaching 98.3 million barrels a day, or 900,000 more than the group projected in December.

After peaking at 61.4 million barrels per day in 2027, it sees output slipping in non-Opec producers to 58.9 million barrels per day in 2040.

Nigeria and Libya are exempt from the freeze, according to the plan announced in Algiers five weeks ago, but increases in Iraq and the expected return of Angolan production once the Dalia field maintenance is complete will make it harder. As OPEC raises its demand forecast, oil starts to price in a Hillary Clinton presidency that will lead to more regulation and ultimately higher prices.

"A maximum programme, apparently includes the promotion of Saudi Arabia's idea that the non-OPEC countries should reduce their production levels". "There was too much uncertainty for the market to develop a clear direction in price", said James Williams, president of energy consultant WTRG Economics in Arkansas.

"Since its trough on May 27, 2016, producers have added 134 oil rigs (+40 percent) in the US", Goldman Sachs said in a note.

"There continue to be many hurdles for the oil and energy industries to overcome", OPEC said.

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