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In a volatile session yesterday, Brent fluctuated between $62.5 and $64

By A/S Global Risk Management.

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Updated on 13 Feb 2018 08:47 GMT

In a volatile session yesterday, Brent oil price fluctuated between $62.5 and $64. At the time of writing, the price is just below $63

In its monthly report, published yesterday, OPEC said that global oil demand would grow faster than previously expected in 2018 because of a healthy world economy, but that oil markets will return to balance only towards the end of 2018 due to higher output from non-OPEC producers such as the U.S. OPEC projected that global oil demand will rise by 1.59 mil bpd in 2018, representing an increase of 60,000 bpd from its previous forecast. "Recently, healthy and steady economic development in major global oil demand centres was the key driver behind strong oil demand growth," the report noted. "This close linkage between economic growth and oil demand is foreseen to continue, at least for the short term." Balancing the higher demand forecast, the report said that the U.S. and other non-OPEC producers will boost their oil supply by 1.4 mil bpd this year , up 250,000 bpd from last month's projection. "The steady oil price recovery since summer 2017 and renewed interest in growth opportunities have led to oil majors catching up in terms of exploration activity this year, both in the shale industry and offshore deep water," OPEC said. Hence "the market is only expected to return to balance towards the end of this year." The report estimated that oil inventories in developed economies declined by 22.9 mil bbls in December to 2.888 billion bbls, which is 109 mil bbls above their 5-year average. In January, OPEC's output fell by 8,000 bpd to 32.302 mil bpd, with adherence by members to their output targets up from December at 137 pct. Finally, OPEC said in the report that the call on OPEC crude will average 32.86 mil bpd in 2018. Should OPEC keep pumping at January's level, this implies that there will be a deficit of about 558,000 bpd in 2018 which requires further drawdown of oil inventories.

Later today, the IEA will release its monthly report which could also cause some market volatility along with tonight's weekly oil stocks data from the American Petroleum Institute (API). Consensus is a build of around 2.6 mio. barrels in crude oil stocks.

Turning to economic data, today sees UK inflation data. Tomorrow is more packed with economic key numbers like Japanese, German and Eurozone GDPs and U.S. retail sales.

A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.

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A/S Global Risk Management Ltd.

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