The Kingdom adopts a "carrot and stick" approach as US production rises and inventories remain stubbornly high Brent fell in mid-March on market concerns about the OPEC/non-OPEC production agreement’s ability to reduce inventories. Saudi energy minister Khalid al-Falih fired a warning shot to his partners and the market at CERAWeek in Houston, saying the country would not tolerate “free-riders.” As a result, we trim our 2017 and 2018 average Brent forecasts.We expect oil demand to rise in 2017, mainly driven by China and India, though India will face curtailed demand growth this year as a result of demonetisation. OPEC compliance improved in February, but is still reliant on three members supporting less compliant nations. US production has grown mostly from offshore rather than LTO as yet, but this has filled crude and gasoline inventories as refinery runs fall. We thus consider it likely OPEC’s production deal extends beyond June on similar terms.