The International Energy Agency (IEA) agrees with my assessment that the historic OPEC/non-OPEC agreement will put us into a supply deficit early next year and will start to work off the global oil glut. We have been seeing signs that demand is rising in the U.S., Russia and China at a time when non-OPEC production is faltering. We are on the road to rising demand and lower global production and so, ultimately higher oil prices. Prices that yesterday, closed at the highest level since July, 2015.

The IEA, in the final year end report, said that, “In December, we are seeing the first proposed output cut by OPEC since 2008 – and the first deal including non-OPEC producers since 2001 – which marks a major departure from the market share policy followed for the past two years. OPEC’s cut to crude production of 1.2 mb/d almost matches its deliberate production increase of 1.3 mb/d in the twelve months to October (the month on which the OPEC cuts are based), while the non-OPEC group has seen its crude output fall in the same period by about 0.9 mb/d. The IEA also raised their demand forecast, following revisions to Chinese and Russian and US data to a 2016 global net demand growth number to 1.4 mb/d and that for 2017 to 1.3 mb/d.

Even before the agreement the IEA said that, “demand and supply numbers suggested that the market would re-balance by the end of 2017. But OPEC, Russia and other producers are looking to speed up the process. If OPEC promptly and fully sticks to its production target, assessed at 32.7 mb/d, and non-OPEC producers deliver the agreed cuts of 558 kb/d outlined on 10 December, then the market is likely to move into deficit in the first half of 2017 by an estimated 0.6 mb/d. This is not a forecast by the IEA, it is an assumption based on the numbers in OPEC’s 30 November agreement, subsequently reinforced by the non-OPEC producers.”

Overnight Reuters reported that China’s November crude output fell 9 percent versus a year earlier to 3.915 million barrels per day, data showed on Tuesday, but recovered from October’s 3.78 million bpd, which was the lowest in more than seven years. That came as China’s refinery output hit a daily record in November of 11.14 million bpd, up 3.4 percent year-on-yea. This is a strong sign that China’s demand is humming and production falling, increasing Chinese oil import expectations.