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A tale of two forecasts

Both the IEA and Opec agree global oil demand will increase in 2017. Supplies are trickier to figure out

While neither the International Energy Agency (IEA) nor Opec proved particularly successful at forecasting oil supply and demand trends in 2016 they agree on two things: economic growth will drive global oil consumption higher in 2017 and the call on Opec is increasing. Now Opec has agreed a deal to curb output by 1.2m barrels a day from January, so if the agencies are right the market will tighten.

Both Opec and the IEA expect global economic growth to average around 3% in 2017, roughly in line with the International Monetary Fund (IMF)'s estimate for 2016. That will yield oil-consumption growth of 1.2m b/d, about the same as in 2016. But in absolute terms, their baselines still differ. The IEA expects consumption will hit 97.5m b/d; Opec, 95.55m b/d.

Opec must supply more of this oil, agree both bodies. The IEA expects the call on its crude to increase by 0.6m b/d in 2017, reaching 33.3m b/d. Opec says the rise will be 0.8m b/d, to 32.7m b/d. In October the group's output surged to a record 33.83m b/d, according to the IEA, the fifth consecutive month of rises.

That should all lend a hand in tightening the market, forcing a draw on global stocks. But non-Opec is the key. Both forecasters expect its supply, which dropped by about 0.9m b/d in 2016, to start rising again in 2017. The IEA forecasts 0.5m b/d more supply from non-Opec in 2017, to 57.2m b/d, and Opec predicts a rise of 230,000 b/d, to 56.43m b/d.

But those predictions don't include the 0.6m b/d cut from non-Opec producers that were pledged as part of the agreement with Opec on 30 November. Russia has now promised to account for 300,000 b/d of the reduction, over the first half of 2017. Oman, Kazakhstan, Mexico and Azerbaijan are expected to account for the remainder. Details were due at a meeting on 10 December in Vienna.

Crucial will be how many barrels of that non-Opec supply go missing next year that were already likely to disappear-in the form, for instance, of natural Mexican declines that will now be called "cuts" but have already been accounted for in the forecast. Opec also says its supply deal is contingent on non-Opec's participation. The devil might sit in the details.

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