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Oil falls as OPEC extends the production deal, but if politics is the art of the possible, is the market expecting too much? Brent broadly recovered to c. $54/bbl from a low of $48.30/bbl on 4th May before the OPEC deal was rolled over on 25th May, when it retreated to $51.29/bbl. We expect traders to return to “business as usual,” reacting more to fundamentals, in particular US inventories, as headlines related to the production deal dwindle. We lower our Brent forecasts for 2017 and 2018 as a result. Conflicting IEA/EIA figures and indications of weaker US demand growth see our global demand forecast down slightly. China eyes “One Belt, One Road” strategy long term, but hits turbulence in the short term as manufacturing PMI falls. The effect on oil demand of Indian demonetisation appears to be wearing off, as April consumption was higher y-o-y after a weaker start to the year. OPEC production held steady in April as compliance improved. The US Drilling Productivity Report may be overstating LTO production growth so far this year. As previously reported, demand likely already exceeds production, leading to inventory draws, but the risk of increased stocks in 2018 remains.