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Amid a fresh oil price rally, albeit a moderate one, on the back of events in Kurdistan, the head of the International Energy Agency said that OPEC’s compliance rate with the oil production cut deal had fallen to 86 percent.
Speaking to Reuters on the sidelines of the World Knowledge Forum, Fatih Birol added that the compliance rate is “higher than in the past” and that if OPEC decides to pursue the deal beyond its March 2018 deadline, the market will move closer to rebalancing.
This compliance rate is not particularly high, and compares to the all-time high of 116 percent for August, which sparked the last price increase, helped by forecasts for higher oil demand growth than previously estimated. The July compliance was also significantly higher than the current rate, at 94 percent, and so was compliance in May, at 95 percent. The lowest compliance rate was recorded in June, at 78 percent.
Back in July, the IEA noted that “Each month something seems to come along to raise doubts about the pace of the rebalancing process.” This seems to still be true, despite efforts by OPEC officials to reassure market players that everyone in the cartel and its partners are committed to the cut that was supposed to take 1.8 million bpd off daily global production to prop up prices.
The latest production report from OPEC has further undermined hopes for a quicker, rather than slower, rebalancing of the world’s supply of crude oil. OPEC pumped 32.75 million bpd in September, up 88,500 bpd from the previous month, the cartel reported in its latest Monthly Oil Market Report. August was the first month in five when OPEC production declined.
Under the production agreement, OPEC committed to 32.5 million bpd in daily production.
The cartel tried to cushion the blow by revising its 2017 and 2018 world oil demand forecast by about 30,000 bpd in 2017 and 2018. After this latest update, OPEC now expects crude oil demand this year to grow by 1.5 million bpd and in 2018 it sees it growing by 1.4 million barrels daily.
The IEA in June forecast that demand for OPEC oil will reach 33.6 million bpd in the last quarter of the year, up 1 million bpd on the cartel’s June production rate.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.