There has been no talk about extending crude oil production cuts into next year, OPEC’s president, UAE energy minister Suhail al-Mazrouei, said ahead of this year’s CERAWeek. “We feel there is still some market overhang,” he told Reuters.
Last month, OPEC said in its Monthly Oil Market Report that based on OECD commercial stocks numbers from December, “In line with the existing overhang, the market is only expected to return to balance towards the end of this year.”
Yet at the same time, the cartel has been discussing alternative ways of measuring global supply to replace the OECD stockpiles estimate, which OPEC feels does not paint an accurate picture of reality. Even so, IEA data shows that OPEC and its partners led by Russia have been overperforming: the overhang in OECD oil inventories has shrunk to just 52 million barrels from 264 million barrels a year ago.
There is a problem with this metric, however. The OECD five-year average is a moving target, and in the last years it has had to reflect the substantial oversupply brought about by the shale revolution in the United States. In other words, the five-year average now is very different than the five-year average from, say, the middle of last decade, hence the talk about using another, preferably broader, metric. Related: Can Russia & China Rescue Venezuela?
Yet there is consensus that the cut deal has worked even better than expected. However, this has not been the result of a voluntary effort, but rather a combination of Saudi Arabia cutting much more than agreed to make up for lower compliance elsewhere in OPEC and Venezuela suffering its worst production rates in three decades.
Al Mazrouei said OPEC was discussing ways to help its crisis-stricken member restore its oil production, which has fallen 13 percent since the end of 2016 to 2.07 million bpd. This, oddly enough, is above the target set for the country in the OPEC agreement. The target is 1.972 million bpd.
By Irina Slav for Oilprice.com
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