Published: Sat, February 11, 2017
Markets | By Terence Owen

IEA reports 90% compliance with OPEC cuts

Supply from the 11 members of the Organization of the Petroleum Exporting Countries with production targets under the deal fell to 29.921 million barrels per day, according to the average assessments of the six secondary sources OPEC uses to monitor output, or a 92 percent compliance.

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.

Libya is targeting production of 900,000 barrels per day by the end of this year while Nigeria is hoping just to keep pace with last year's output after a spate of rebel attacks ravaged oil facilities there. That's the largest drop in three years. "With the current price some fields can be developed profitably though the majority of fields today will not be satisfied with this current price and will not be able to justify further development in high-cost oil fields, especially deep-water and unconventional fields", he added.

OPEC has been joined by 11 nations that are non-members including Kazakhstan and Russian Federation, who collectively have agreed to lower supply per day by 558,000 barrels.

OPEC countries slashed oil production in January 2017 by 1 mln barrels to 32.06 mln barrels a day.

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According to oil companies and ship-tracking data, the members of the group that pledged to make cuts in Vienna two months ago have implemented 83% of those reductions on average.

"There is a demand element to this price rise as well as OPEC compliance", says Michael Hewson, market analyst at CMC Markets. It has agreed to gradually phase in a cut of 300,000 barrels per day.

Pointing to the fruitful negotiations with Iranian delegation headed by Zanganeh, she said the bilateral collaboration on oil issue "can have a positive impact on oil markets". This policy change was largely targeted towards ever increasing market share of the US shale oil companies.

While concerns rose that new US sanctions against Iran could be extended to affect crude and fuel supplies, rising USA production undermines efforts by OPEC and other producers to end global oil oversupply. The country reduced output by 120,000 b/d last month, short of its 210,000 b/d pledge. World oil inventories will fall by 600,000 barrels a day during the first half of the year if OPEC sticks to its agreement, the IEA said.

It is also expected, that around 6 percent of Chinese refining capacity would shut down at some point during the first half of the year, equivalent to around 900,000 bpd of capacity.

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