In our global scenario, we remain positive on commodities for 2017 expecting a market stabilisation or a limited increase in price. We did not change our view, but we would like to emphasise factors which could play favorably for the oil market.

OPEC agreement

One month after the cut agreement decided by the OPEC, the result surprised most of the analysts. It showed that the organisation compliance with ninety percent of the accord, a fact never seen before. As a result,  the global oil supply fell by 1.5 million barrels a day according to the IEA. Goldman Sachs forecasted that at this pace, the market would shift into a deficit during the first half of the year.

What’s about the supply

However, few factors could play against this trend. While the cartel implements its deal, exempt producers are ramping up output. Libya’s production rose for a fifth month to 690,000 barrels a day in January, the highest level in more than two years, while Nigeria’s output expanded to 1.6 million barrels a day last month. U.S. crude production jumped to the highest since April 2016 in the week ended Feb. 3, according to EIA data. Besides, the inventory level remains high from a historical point of view.

Stronger Demand

On the other side, the demand has been stronger than anticipated. The IEA increased its estimates of 2016 world oil demand growth for a third month, and boosted its outlook for 2017, predicting an increase of 1.4 million barrels a day this year. China imported 8.05 million barrels a day in January, a figure up 27.5 percent from the same month last year.

Aramco IPO

Another important argument is the Aramco IPO which will come into the market in the next 18-24 months. The IPO is predicted to raise about $100 billion, which would make it the largest ever. Saudi Arabia is aiming to sell less than 5 percent of Aramco as part of a plan by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons. The kingdom is going to push price at the highest possible in this perspective. With the ability to influence its allies in the region (Irak, Koweit, EUA), an open network communication with Iran through Russia, and a new and apparent collaboration with Moscow, we have a healthy recipe for high oil price in the next two years.