The OPEC deal is closer than ever to meeting its market rebalancing goals, with OECD inventories now just 74 million barrels above the five-year average recorded in January 2017, according to a report by Reuters.
When the output reduction deal went into effect at the beginning of last year, inventories were 340 million barrels above the benchmark figure, according to Ayed Al Qahtani, who heads OPEC's research group. The official made the remarks during the ongoing International Petroleum Week proceedings in London.
"This conformity level has been very successful in withdrawing the overhang," Al Qahtani told the audience.
OPEC members have been reducing output by 1.2 million barrels per day to push prices upwards. Markets have been stubbornly bearish since the September 2014 and January 2016 crashes, but the past year has seen some upward movement in the Brent barrel.
There are also roughly a dozen other non-OPEC nations that have pledged to cut 600,000 additional barrels per day, with Russia making half of these additional reductions. The OPEC and the non-OPEC producers will draft a plan for long-term cooperation this year to institutionalize their current collaboration into a supergroup of oil producers led by Saudi Arabia and Russia, Emirati Energy Minister Suhail Al Mazrouei told The National in an interview published this month.
The producers aim "together with the secretary general [of OPEC, Mohammad Barkindo], to put together a draft agreement for this group [of 24] to stay together for a longer time", Al Mazrouei said. Putting together a draft charter and discussing it during the year is one of the UAE's aspirations, said the minister whose country is currently holding OPEC's presidency.
The idea to follow up on the current OPEC/non-OPEC cooperation came originally from OPEC's Secretary General Mohammad Barkindo, who said as early as October last year that the partnership could be institutionalized.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More
Comments
Still, OPEC/non-OPEC producers have displayed unprecedented discipline in abiding by the agreement. And now that they are planning to institutionalize their cooperation for long term cooperation, oil prices will be receiving added support in the future.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London