The International Energy Agency says OPEC and non-OPEC countries participating in the cartel’s supply cut agreement have reached their goals of cutting global crude stocks to desired levels. Bloomberg photo by Daniel Acker.
OPEC goal to see developed countries’ crude stocks fall to five-year average
The International Energy Agency says participants in the OPEC supply cut agreement have all but met their goal of reducing global crude stocks and cautioned that the oil market could become too tight if the cartel’s supply restraints continued.
The IEA says that by May, crude stocks in developed countries could be down to their five-year average, a metric used by OPEC to measure the success of its production cuts.
“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its monthly report.
Many OPEC nations along with Russia and some other non-cartel oil producing countries agreed in January 2017 to cut their production by a combined 1.8 million barrels per day (b/d).
Since then, oil prices have risen from below $30/barrel to over $70/barrel, despite a significant increase in US production. Non-OPEC output, including the US, is expected to rise by 1.8 million b/d, not enough to meet rising global demand.
The IEA cautions that with faltering oil production in Venezuela and cartel members Libya and Angola are still experiencing production interruptions, OPEC is now producing below its targets. Thus, to meet rising global demand, crude stocks are declining.
OPEC released its monthly report on Thursday which showed oil stocks in the developed world only 43 million barrels above the latest five-year average. IEA data shows that figure at just 30 million barrels at the end of February.
According to the OPEC report, the cartel produced 31.83 million b/d in March, below demand for its crude for the rest of 2018 at 32.5 million b/d.
“Our balances show that if OPEC production were constant this year, and if our outlooks for non-OPEC production and oil demand remain unchanged, in 2Q18-4Q18 global stocks could draw by about 0.6 million bpd,” the IEA said.