The industry grows upstream capex as cautious optimism returns, including in deepwater offshore Mexico Brent has held at c. $55/bbl, off slightly from its year end value of $56.71/bbl on fears of a US production recovery and high inventories. We forecast average Brent to remain below $55/bbl for 2017, and below $60/bbl in 2018. Global oil demand averaged 1.43 million b/d in 2016 (-270,000 b/d y-o-y). We expect this to rise in 2017 as US demand for diesel recovers on, amongst other things, greater tight oil activity. We see OPEC’s compliance to the production cut deal at 72% in January, despite December output reaching 33.1 million b/d. The major test for OPEC is still to come in the summer season, when members will have to hold the line in the face of higher prices; a cuts extension may be needed. A positive response to Mexico’s “Ronda Una” block auction suggests Big Oil still sees potential in deep water. Barclays sees upstream capex rising 20% y-o-y in 2017, though still 40% lower than 2014’s levels.