Geopolitical developments have also contributed, with market participants rebuilding an oil-price risk premium attached to potential production outages in the Middle East. Fighting in Syria (and Russia's intervention there), plus attacks by ISIS on production facilities in northern Iraq — all of this has raised the risk of outages occurring.
Of course, oil nations and businesses could be forgiven for being skeptical of the latest price rally, which is on track to be the longest since April. Several promising rallies in crude have fizzled out over the course of 2015. In January, Brent climbed over 30 percent, raising expectations that the worst was over for oil producers. A second rally between March and April met with the same fate. However, we think the latest one is based on firmer foundations.
In emerging Asia, where economic concerns have risen, oil demand has been resilient. In China and India, it rose by around 7 percent in August from a year earlier. Regionally, oil demand is primarily supported by gasoline consumption. As a whole, supported by low oil prices, we expect global oil demand to climb by 1.7 million barrels per day this year, its fastest pace in five years. While market concerns of a Chinese hard landing have increased of late, we assign a low probability to such an event. Additionally, solid demand through August suggests it is too early to say if the oil rebalancing process has been delayed materially.