Oil futures climbed Friday after the International Energy Agency reported a record compliance rate on the OPEC output deal, as 90% of the crude that the cartel agreed to cut was removed from the market. But it also repeated its forecast that overall non-OPEC production is likely to increase by almost 400,000 b/d this year, compared with an 800,000 b/d decrease last year, thanks to a revival in U.S. shale output and longer term investment in Brazil and Canada.
The Organization of the Petroleum Exporting Countries on November 30 agreed to cut its production from January by 1.2 million barrels a day to end a persistent oil glut. In January, most producers adhered more or less to their respective targets, with the Saudis cutting output by 520,000 b/d, some 34,000 b/d more than what they committed.
Thus, with the compliance of OPEC deal to increase only gradually, relatively sharper increase in the U.S.'s daily oil production will have bearish influence on oil prices. As a result of the high compliance OPEC and non-OPEC cut, OECD storage should be back to the five-year average by June this year.
Oil prices are today trading stronger, with Brent crude up 40 cents to $55.52 per barrel, and WTI crude up 51 cents at $52.84 per barrel.
Year 2016 has witnessed some of the landmark decisions in the oil market, which has reversed the trend of oil disagreements within the OPEC and non-OPEC countries, helping rebalancing of the oil markets. The country reduced output by 120,000 b/d last month, short of its 210,000 b/d pledge.
With a view to contributing to support the oil barrel price, the Vienna-based organization of the major Middle East oil producers has agreed to accept a very considerable output reduction, together with the Russian Federation and other countries, which is worth at least fewer 1.8 million oil barrels per day.
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That debt relief must be accompanied, however, by "strong policy implementation to restore growth and sustainability", it said . In that report the fund called on Europe to provide a credible debt relief program for Greece.
OPEC made a decision to cut oil production by 1.2 million barrels per day, capping the output at a daily 32.5 million barrels, according to Sputnik News.
News headlines in the oil markets were no doubt mostly bearish this week, a turnaround from what we saw at the beginning of the year when markets were still on their OPEC-induced high.
Brent was on track for its first weekly drop in four weeks while US crude headed for its fourth straight week of gains.
Inventories worldwide of oil will drop per day by 600,000 barrels during the first six months of 2017 if OPEC holds to the agreement, said IEA officials.
"But it does not eliminate (the surplus) in the first half of the year", he added.
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