OPEC post first y-o-y decline in oil production since 2015

DrFatihBirol 1The International Energy Agency (IEA) released its Oil Market Report on 10 February 2017 stating that global oil supplies plunged by nearly 15 mn bpd in January 2017, with both OPEC and non-OPEC countries producing less oil. (image source: IEA/Commons)The International Energy Agency (IEA) released its Oil Market Report on 10 February 2017 stating that global oil supplies plunged by nearly 15 mn bpd in January 2017, with both OPEC and non-OPEC countries producing less oil

The world produced 96.4 mn bpd, 730,000 bpd below the same time last year. A lot of this was due to OPEC posting its first year-on-year decline since the beginning of 2015. Organization of Petroleum Exporting Countrie’s crude production fell 1 mn bpd, to 32.06 mn bdp in January 2017. IEA estimated that there was a record initial compliance of 90 per cent of the OPEC output agreement. Some countries, including Saudi Arabia, actually cut more than they agreed to cut. However, lower production was also partly offset by the higher production flows from both Libya and Nigeria, which are exempt from the cuts. 

It is predicted, by International Energy Agency, that non-OPEC countries’ output with grow by 0.4 mn bpd in 2017. This is after a fall in production in 2016, were non-OPEC countrie’s production fell by 0.8 mn bpd. The growth in non-OPEC production is mainly coming from the Americas, where higher prices are fuelling increased investments in US LTO activity and long lead-time projects are coming on stream in Brazil and Canada. 

In the IEA report, they started that: “We do not forecast what OPEC production will be during the six months covered by the output deal; but if the January level of compliance is maintained, the difference between global demand and supply implies a stock draw of 0.6 mn bpd. It should be remembered, though, that this stock draw is from a great height. OECD stocks of crude and products have fallen for five consecutive months and in quarter 4 of 2016 they drew by nearly 800,000 bpd. At the end of the year they were still 286 mb above the five-year average level and by the end of the first half of 2017 they will remain significantly above average levels. The continued existence of high stocks, plus caution from the markets in assessing the level of output cuts and how other producers might grow production, explains why Brent crude oil prices have remained at the mid-$50s/bbl level since mid-December after receiving a post-output deal boost of close to $10/bbl. The oil market is very much in a wait-and-see mode.” 

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