Demand for crude in non members of the Organisation for Economic Co-operation (OECD) countries that account for 54% of the total demand globally remains strongOil prices are likely to rebound to $125 in the coming months due to tight market supply, declining spare capacity and low oil inventories, according to Swiss bank UBS.

In a research note on Thursday, UBS strategists said the latest remarks by Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman about a disconnect between oil futures prices from market fundamentals and that OPEC+ has the means to deal with market challenges including cutting production at any time, suggests “there is a desire to defend oil prices to stay above the level of $90 per barrel.”

“We continue to believe that fundamentals point to higher prices. Spare capacity is below 2 million barrels per day, and oil inventories stand at a multiyear low,” authors of the UBS report said.

The European Union intends to cut its dependence on Russian waterborne crude imports by December 5 and refined products by February 5.

This will likely cause some disruptions as Russian oil imports to the EU amounted to 2.8m bpd in July.

Also, ending sales from the strategic oil reserves of OECD countries will remove more than 1m bpd of supply from November, pointing to tighter markets at the end of the year.”

UBS said while oil demand in OECD countries has been lacklustre lately, it remains strong in non-OECD countries, which account for 54 per cent of the total demand globally. Oil prices gained this week after Prince Abdulaziz’s comments.

Saudi Arabia, the world’s biggest exporter of oil, leads the Opec+ alliance of 23 oil producers along with Russia.

Flourish logoA Flourish mapBrent, the global benchmark for two thirds of the world’s oil, was trading 0.68 per cent higher at $101.90 a barrel at 4.02pm UAE time.

West Texas Intermediate, the gauge that tracks US crude, was up 0.43 per cent at $95.30 a barrel.

Oil prices have been volatile this year, with Brent shooting up to nearly $140 a barrel in March following the outbreak of Russia’s war in Ukraine and subsequent supply concerns.

Western countries imposed sanctions on Russia, the world’s second largest energy exporter, for its military offensive in Ukraine.

Prices have since receded on mounting concerns of a global recession, its impact on demand and more recently, the potential revival of the 2015 Iran nuclear deal.

“Oil traders are focused on two things and two things only, and that is the possibility of the Iranian nuclear deal taking place, which could bring Iranian oil on the market … and secondly, and more importantly, the output from Opec,” said Naeem Aslam, chief market analyst at Avatrade.

Should OPEC scale back its oil output, that would address trade concerns about Iranian oil destabilising the oil supply and demand curve, he said.

Edward Moya, a senior market analyst at Oanda agreed, pointing to an expected continued decline in US stockpiles over the coming weeks over strong export demand.

“Oil prices could surge over the next few weeks if Opec+ is forced to cut output and if Iran nuclear deal talks falter again,” he said.

On Wednesday, Kuwait’s Deputy Prime Minister and Minister of Oil Mohammad Al-Faris repeated statements made by other energy ministers and industry analysts that “structural supply weaknesses caused by years of underinvestment have led to extremely limited worldwide spare capacity.”

This situation has contributed to “extraordinary volatility in the oil markets at a time when these markets need stability like never before to allow participants to plan future production capacity increases to meet rising demand”, he said.

The National

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