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Oil prices spike despite demand drop, supply hike: IEA

To stabilise the market, industry needs to continue its discipline, report says

Continued commitment from oil producers has boosted oil prices, despite a drop in global demand and an increase in supply in the third quarter of the year.

In its latest Oil Market Report, the International Energy Agency (IEA) said global demand slowed in the third quarter to 1.2 million barrels of oil per day, “ reflecting relatively weak July and August data and the impact of hurricanes in September”.

Moving forward, the forecast of global demand growth remains unchanged at 1.6 million bpd in 2017 and 1.4 million bpd in 2018, the IEA said.

Meanwhile, global oil supply increased by 90,000 bpd in September to 97.5 million bpd as non-Opec output edged higher.

“In 2017, non-Opec supplies are expected to grow by 700,000 bpd, followed by a 1.5 million bpd increase in 2018,” the Paris-based research body said.

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Opec crude output was virtually unchanged in September as slightly higher flows from Libya and Iraq offset lower supply from Venezuela. Output of 32.65 million bpd was down 400,000 bpd on a year ago, according to the report.

“There is little doubt that leading producers have re-committed to do whatever it takes to underpin the market and to support the long process of re-balancing,” the IEA said, as the oil price climbed to close to the symbolic level of $60 per barrel before retreating to $57 per barrel.

While this “upward momentum” was supported by strong oil demand, signs of possibly slower than expected growth in US shale production and the uncertainty with some suppliers, like Libya, Venezuela, Iran and northern Iraq, the agency also called for “continued discipline”.

“Looking into 2018, we see that three quarters out of four will be roughly balanced - again using an assumption of unchanged Opec production, and based on normal weather conditions,” the IEA said. “However, our current numbers for the first quarter of 2018 imply a stock build of up to 800,000 bpd.”

“Taking 2018 as a whole, oil demand and non-Opec production will grow by roughly the same volume and it is this current outlook that might act as the ceiling for aspirations of higher oil prices,” it said.

“A lot has been achieved towards stabilising the market, but to build on this success in 2018 will require continued discipline.”