OPEC on Monday revised up its forecast for worldwide oil demand in 2017 and reported record-setting compliance in the first month of a deal to reduce crude supplies.
The new forecast comes after a recent commitment by the organization and 11 non-OPEC countries to reduce production in a bid to manage supply and demand levels better. In January, OPEC production decreased by 890,000 barrels per day, according to secondary sources noted in OPEC's latest monthly report.
Among the OPEC members who have committed to production quotas, total output in January was 29.9 million barrels a day. That puts compliance with the deal, which aims to remove about 1.2 million barrels a day from the market, at as high as 93 percent, according to Reuters.
The market was anticipating a high degree of compliance after Reuters, S&P Global Platts and the International Energy Agency last week reported OPEC had achieved at least 90 percent of the cuts.
As anticipated, Saudi Arabia delivered the lion's share of reductions. Its production was down by about 496,000 barrels a day.
That was partially offset by production increases in Nigeria and Libya, which are exempt from the deal as they seek to restore oil supply that was sidelined due to internal conflicts.
Iran is also allowed to continue increasing production up to a point following the lifting of sanctions last year. It raised output in January by about 50,000 barrels a day.
Global demand for oil could outdo the 10-year average in 2017 as the health of the world economy improves and demand for road transport continues to grow, OPEC said in the report.
The new data from the oil cartel Monday expects demand to grow at 1.2 million barrels per day, up slightly from an earlier estimate and "well above" the 1 million barrel a day averages seen in the past decade.
OPEC's forecast for 2017 is down slightly from the 1.3 million barrels a day estimated for 2016, during which oil demand in OECD Europe, OECD Asia Pacific and other Asia was "better-than-expected" due to increased demand in the petrochemical and transportation sectors.
However, OPEC is expecting growing demand for road transportation and the expanding petrochemical sectors in the U.S. and China to be driving factors in the continued growth in oil demand over the coming year.
Vehicle sales are expected to increase in the U.S., Europe, China and India, according to the report. However, OPEC is also expecting technological developments and increased regulations on fuel consumption to weigh on this somewhat.
These trends are expected to supplement growing global economic activities, according to OPEC, which is forecasting growth of 3.2 percent in 2017.
This growth is predicted to come largely from OECD (Organization for Economic Co-operation and Development) economies – particularly OECD Europe – following solid performance in 2016.
OPEC has revised up its 2017 predictions for growth in these advanced economies from 1.8 percent to 1.9 percent, but says future growth forecasts are likely to be dependent on U.S. fiscal stimulus.
"More upside to OECD growth may come from fiscal stimulus in the U.S., but the magnitude and scope of it remains to be seen. Moreover, a continuation of the rebalancing of the oil market after the historic OPEC/non-OPEC declaration of cooperation in December may support oil producers further and may lead to improvements in economic activity, along with renewed investments," the report said.
The report presents a more moderate vision than that espoused last week by the International Energy Agency, which, despite highlighting a forthcoming period of sluggishness, forecast demand to grow by 1.4 mb/d in 2017. Again down slightly from the 1.6 mb/d it projected from 2016.