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Oil Market Snapshot – April 2019 Trump Abandons Waivers, Setting Stage for Vienna Group Increase

Brent has continued to rally in April, hitting $74/bbl on 22nd April as the US announced the end of waivers for its sanctions on Iran, and in the context of better economic news from China and the US. On the back of this news, we have increased our Brent 2019 forecast to $68.93/bbl(+$1.70/bbl on previous). An increasing net long ratio in the futures market suggests potential for a market correction in the near term, though the situation in Libya adds a risk of supply outages. Our global demand growth forecast for 2019 is unchanged at 1.39 million b/d, but rebalanced more towards non-OECD countries. Our global supply growth estimates for 2019 is 1.05 million b/d (+30,000 b/d), led by the US (+1.07 million b/d) but offset by OPEC’s decline (-800,000 b/d). The Mediterranean and South and East Africa are emerging as centres of an offshore revival as majors turn to gas. Chevron and Occidental are in a bidding war over Anadarko, raising the chance other LTO independents may be takeover targets, though we see the majors tempering LTO production growth. OPEC compliance with the Vienna Group deal reached 154% in March, with Saudi Arabia at 261% compliance while floods in Iraq forced the country to 94%. Given ending sanctions waivers and the proximity of the summer season, we expect Saudi Arabia to start adding production back in the near future in concert with its allies....

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