The agency previously assumed inventories would not drop until the end of 2017. The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions.Saudi Energy Minister Khalid al-Falih said the kingdom may be willing to cut to below 10.058 million bpd next year.
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The OPEC committed to halting the supply of 1.2 million barrels a day, starting from January.
After reports that shale oil producers were ready to revive dormant oil wells following Saturday’s deal, not all analysts were positive about the agreement.
Those taking part in Saturday’s deal included Russian Federation – which will provide the lion’s share of the cut – as well as Mexico and Bahrain among others.
The deal also includes Malaysia, Bahrain, Equatorial Guinea, Sudan, South Sudan and Brunei.
Oil prices ended with no real trend Tuesday as investors stepping back after a sharp rise in the wake of an agreement on the supply from the Organization of Petroleum Exporting Countries (OPEC) and other country.
Oil officials said Mexico’s contributions would be made through “managed natural decline”, meaning the Latin American nation will not cut output deliberately, but will let production fall as its aging fields yield less.
And markets will be watching closely to see whether OPEC and non-OPEC states comply with the agreement.
To reiterate, the deal with non-members comes just days after OPEC struck its first deal to cut production output since 2008. Moreover, considering India’s growing ties with the United States, major oil-producing nations may be hesitant to cut favourable deals.
Crude futures have rallied sharply, with USA futures gaining 23 percent since the middle of November as optimism that an agreement would be reached started to grow. Removing excess barrels will lift prices, possibly into the target range of $ 60-$70 per barrel, but it would mostly hinge on the compliance of the producers who have been known to cheat, BMI Research said.
International Brent crude futures was trading at $55.65 a barrel early this morning, down four cents from its last close.
The OPEC cutback alone would have been noteworthy as the first time in eight years the cartel was able to agree on such a move.
It also represented a dramatic reversal from OPEC’s Saudi-led game plan, introduced in 2014, of flooding the market to force out rivals, in particular U.S. shale oil producers.
That is especially true in the current climate, where subdued oil prices – which remain around half of what they were in mid-2014 – have hurt the finances of pretty much every single oil producer.
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“And OPEC accounts for only about 40% of world crude production, so yes, there’s a day-one impact, but I think it’s at the edges here”.
