OPEC Lifts 2018 Oil Demand Total to 98.51 Million Barrels a Day

Crude oil prices hit a fresh three-year high and rose past the psychologically important $70-a-barrel mark on Tuesday

China demand will be a crucial determinant of global oil prices.

The International Energy Agency (IEA), in its monthly report, said global oil stocks have tightened substantially, aided by OPEC cuts, demand growth and Venezuelan production hitting near 30-year lows. The country has been restricting its oil production since the beginning of 2017 when OPEC and non-OPEC producers agreed to reduce their production levels in order to stabilise the market.

Iraqi crude oil production is holding steady at near its all-time high.

If Friday's falls last, this week will see the biggest weekly price declines since October.

Read:Expert analysis: Could 2018 mark a turning point for oil?

Traders said the lower prices were prompted by a recovery in US oil production after a recent drop, as well as by an expected fall in demand when winter ends in the northern hemisphere.

Executive Director, Fatih Birol, said at an event that oil producers may be enjoying oil prices at $65 and $70 per barrel, but these price levels are likely to encourage even more oversupply from United States (U.S.) shale.

"The bank now sees Brent averaging $64 a barrel in 2018, versus an earlier estimate for $56 a barrel".

"After years of oversupply, the inventories are contracting much faster than the markets had anticipated", said Stephen Innes, Head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

According to the National Bureau of Statistics, it's the first time annual growth has improved in seven years.

As the Organization of Petroleum Exporting Countries and allies including Russian Federation gather in Oman this weekend, achievements including a three-year high in oil prices and rapidly dwindling supply glut may be overshadowed by the risk of becoming victims of their own success. Maduro has said Venezuela is willing to restructure its foreign debt, including some $60 billion in bonds issued by PDVSA and the government, but the country has been late with bond payments in the last few months. Industries such as tyre manufacturing and paint producers, may also face downside risks to their margins, if the price of crude oil stays on the higher end or rises further.

Gasoline stocks rose by 1.8 million barrels while distillate fuels stockpiles, which include diesel and heating oil, climbed by 609,000 barrels, the API data showed.

Venezuela, whose output is dropping amid an economic crisis, told OPEC its production sank by about 216,000 bpd to 1.621 million bpd in December, believed to be the lowest in decades.

"It will take discipline for members to slowly boost output to some intermediate target".

Minister of Energy Alexander Novak will discuss Russia's potential exit from output reduction deal with OPEC next week.

Read: How does Kuwait reduce a $23.6bn budget deficit?

But adherence by the 11 OPEC members with output targets rose to 129 percent, according to a Reuters calculation based on the OPEC figures, higher than 121 percent in November based on last month's report.

"This year promises to be a record-setting one for the U.S.", the IEA wrote in its monthly market report.

With plenty of surplus oil still around, ministers from the UAE, Iraq and Kuwait insist there's no need to change strategy today.

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