The Organization of Petroleum Exporting Countries (OPEC) has achieved the best percentage of compliance in its history after the deal to reduce oil production, according to the International Energy Agency (IEA). OPEC has imposed 90% of the promised reduction in yield in January – the first month of the agreement after a key member country Saudi Arabia has lowered production even more than promised. The sustained demand for oil, supports OPEC in attempts to rebalance the global markets, grewing more than expected last year. This is expected to continue in 2017.
“OPEC clearly gave stable start of the six-month process”, said the the Paris-based IEA, which advises major economies on energy policies. “The first reduction is certainly one of the deepest in the history of initiatives OPEC to lower production”, adds IEA.
The agency estimates and raised its 2016 World oil demand for a third month and increased its forecast for this year, expecting demand growth of 1.4 million barrels per day. World oil reserves will decrease by 0.600 million barrels per day in the first half of the year if OPEC comply with the agreement, according to the report. Although the reserves in industrial countries fell for five consecutive months in the fourth quarter fell by the largest percentage of three years, they remain well above average levels.
“This decline in reserves started with large volume”, said also the IEA. “The continued presence of large reserves” plus fears that reducing OPEC will only boost supply elsewhere explains why oil prices remain limited to about 50 USD per barrel”, added the agency.
The OPEC’s efforts were supported by 11 countries outside the cartel, including Russia and Kazakhstan, which together agreed to reduce supply by 0.558 million barrels per day. Although the agency does not provide an estimate for the implementation of the deal from these countries in January, estimates suggest that they limit yield.
Even if these cuts take place, the total supply from countries outside OPEC will increase by 0.400 million barrels per day this year after a decline in 2016. The main reason for this will be a growth in Brazil, Canada and the USA. Countries outside OPEC will gain an average of 58 million barrels per day in 2017 to about 0.100 million barrels more than forecast in last month’s report.