Fatih Birol, the executive director of the International Energy Agency, expects oil’s fundamentals to regain balance soon, thanks to the output cut deal agreed by OPEC last week. His opinion goes counter to observers who suspect OPEC members are likely to cheat in their compliance with new output targets, including Saudi Arabia’s former Oil Minister Ali al-Naimi.
Speaking to Reuters, Birol reiterated IEA’s earlier forecast that supply and demand for crude oil were unlikely to rebalance until the end of 2017 but added that now, with OPEC’s agreement, this could happen much sooner.
In early November, the international authority warned in its monthly Oil Market Report that unless OPEC cut production soon, the world will continue to choke on oil. The figures that IEA cited in the report had OPEC production at 33.83 million bpd in October, up by 230,000 bpd from the previous month.
As per the November 30 agreement, Saudi Arabia has undertaken to reduce its output by almost half a million bpd from “reference levels”, with Iraq agreeing to cut 210,000 barrels per day the UAE 139,000 bpd, Kuwait 131,000 bpd, and Venezuela 95,000 bpd. Angola pledged to take 78,000 bpd from its daily output and Algeria agreed to pump 50,000 bpd less. Smaller OPEC members Qatar, Ecuador, and Gabon should jointly take off another 65,000 bpd to reach the common target of around 1.2 million bpd less crude.
Nigeria and Libya, however, along with Iran, will not be cutting their production, as they were exempted from the agreement due to loss of market share for reasons other than the glut. Libya plans to raise production by another 300,000 bpd to 900,000 bpd – a rate of increase equal to Russia’s pledged output cut starting January 2017.
By Irina Slav for Oilprice.com
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