According to Platts, the 10 OPEC countries have achieved a 91 percent compliance rate with the targeted cuts (cartel pumped 32.3 million barrels a day last month). Most market analysts believe that January compliance to supply cut commitments of 1.8 million barrels a day has been over 70%.
Therefore, in a bid to support its ailing finances and more importantly to provide profitable environment for upcoming initial public offerings (IPO) of Saudi Aramco, Saudi Arabia once again chose to cut oil production.
While the oil market welcomed the data, which may or may not be accurate as verification remains problematic and recent surges in inventory suggest quite the opposite of what the IEA reports, increasingly more attention has recently fallen on USA crude production, especially in light of a recent surge in Permian drilling rigs...
SEB chief commodities analyst Bjarne Schieldrop said he expected 198 new US oil rigs to come into action in 2017, with 51 added already this year. The figures are important as Platts is one of the sources used in OPEC's official secondary sources survey in its monthly oil market reports (to be published Feb.13).
China met nearly 65 percent of its crude demand by means of imports previous year, due to high costs of domestic production, as well as favorable worldwide prices resulting from the global oversupply. Throttling back at this time of the year is not a huge burden given that demand ebbs ahead of the second quarter.
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The agency forecasts a stockdraw of 600,000 bpd in the first half of 2017 if compliance with the output deal is maintained at January levels. Angola and Qatar also cut more than they had promised.
Global large cap companies continue to bring down operating costs, suggesting more production will be achievable around current prices.
Iran was actually allowed to increase its production under the deal but the IEA reckons it hasn't yet reached the target output level of 3.8m bpd and produced 3.75m bpd last month. It also noted, however, that the decline in oil stocks implied by OPEC's production curb pact is "from a great height".
For example, Libya and Nigeria, the latter of which is Africa's top oil producer, were exempted from the reductions. 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 USA shale output and longer term investment in Brazil and Canada.