The Organization of the Petroleum Exporting Countries (Opec) and other producers, including Russian Federation, agreed a year ago to cut output nearly 1.8 million barrels per day (bpd) during the first half of 2017.
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“Confidence has returned to this market, but I think going forward, we have to watch how the stock levels continue to respond to the full and timely implementation of the declaration of cooperation between OPEC and non-OPEC countries”, he said.
It was the first time in eight years that OPEC members had agreed to scale back output, and so far the accord has been seen as a success, with more than 90% compliance claimed.
Oil has held above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations started trimming supply on January 1 to ease a global glut. Production cuts, in combination with the rising threat of the USA oil industry, are posing a serious threat to the country’s position in the market.
Implementation of an agreement between OPEC and other major producers to reduce output has been “very encouraging” and the agreement is on track to reduce the global oil surplus, said the group’s top official. At fourth place is Iraq with 4.5 million barrels a day. “What we do see is more risk of higher production in the USA, we see a rise in inventories”. However, Russia and other non-Opec nations have delivered a smaller amount of cuts so far.
The US export to Europe is considered to be effective with the premium of $1.5 a barrel in favor of European market. Nigeria’s Mohammed Barkindo is the Secretary General of the OPEC.
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Hedge funds have helped OPEC achieve its objective of higher prices since the end of November, while OPEC has reassured fund managers it will not allow them to lose too much money on their trades. Brent crude meanwhile is exhibiting all the signs that the Opec production cuts are working with the prompt spread getting close to backwardation after trading at contango since last April (see also this article).
