Although the oil market has been improving, OPEC still has work to do to bring global oil inventories back to their five-year average-the metric that OPEC has vowed to achieve with the production cut deal, OPEC Secretary General Mohammad Barkindo said on Monday while on a visit to Azerbaijan.
"The worst is probably over for now. We are beginning to see light at the end of the tunnel but we still have some work to do because we still have inventories that are higher than the 5-year average," Barkindo said at a press briefing in Azerbaijan's capital of Baku, as carried by Reuters.
Barkindo's words signal that OPEC is committed to totally erasing the glut, even if it has mostly achieved this part of its mission.
Last month, the Energy Minister of OPEC's leading producer Saudi Arabia, Khalid al-Falih, said that "If we have to err on over-balancing the market a little bit, so be it."
In an interview with Azeri television Real TV, Barkindo said on Monday that he hoped that stability would be restored to the global oil market this year.
"We are beginning to see that the stability is gradual but still returning to the market," said OPEC's secretary general.
Azerbaijan is part of the non-OPEC countries that have joined the cartel in the pact to support oil prices and draw down excess global oil stockpiles through voluntary production cuts or managed decline.
According to OPEC's latest Monthly Oil Market Report from last week, preliminary data for January showed that total OECD commercial oil stocks rose by 13.7 million barrels from December, reversing the drop of the last five months. At 2.865 billion barrels, OECD stocks were 206 million barrels lower than in January 2017, but 50 million barrels above the latest five-year average, OPEC said. Related: U.S. Shale Drillers To Become Profitable For The First Time
Also last week, the International Energy Agency (IEA) reported the first increase in OECD commercial stocks since July, but the 18-million-barrel increase was only half the usual level, and the surplus to the five-year average dropped to 53 million barrels as of January 2018.
"In the meantime, market re-balancing is clearly moving ahead with key indicators - supply and demand becoming more closely aligned, OECD stocks falling close to average levels, the forward price curve in backwardation at prices that increasingly appear to be sustainable - pointing in that direction," the IEA said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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