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OPEC’s crude oil production dropped by 200,000 bpd in July from June, and helped by additional cuts of 100,000 bpd from the non-OPEC part of the production cut coalition, the market balance in the short term has tightened slightly, the International Energy Agency (IEA) said on Friday, but warned that the slightly tighter market is a “temporary phenomenon.”
According to IEA’s estimate reported by TASS, OPEC’s compliance with the production cuts that were extended into 2020 in early July was 119 percent last month, while the non-OPEC countries part of the deal showed overall compliance of 107 percent with their share of the cuts.
“Robust compliance with OPEC+ supply cuts and losses from Venezuela and Iran saw OPEC oil production fall by 2 mb/d versus July 2018,” the IEA said in its Oil Market Report.
Saudi Arabia’s production in July was 700,000 bpd below its quota under the OPEC+ deal, “in a clear sign of its determination to support market re-balancing,” the IEA said.
On Thursday, reports emerged that Saudi Arabia had approached other members of OPEC to discuss possible steps they can take to arrest a slide in oil prices that have brought them to the lowest in seven months.
Deeper production cuts at leading producer Saudi Arabia, lower output at sanctions-hit Iran, and outages in Libya and Venezuela sent OPEC’s crude oil production in July falling to its lowest level since 2011, the monthly Reuters survey found last week.
The IEA estimates that OPEC’s crude oil production was 29.7 million bpd in July. Should the cartel keep that output level through the rest of the year, this would imply a draw in global stocks of 700,000 bpd in the second half of 2019, also assisted by slowing growth pace of non-OPEC production, the Paris-based agency said.
The slight market tightening, however, will be shattered again next year, as the IEA expects “very strong” non-OPEC production growth at 2.2 million bpd, which, under the current assumptions, will mean that “the oil market will be well supplied.”
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.