The Organization of the Petroleum Exporting Countries (OPEC), has said that global oil stocks surplus is close to evaporating, citing healthy energy demands and its own supply cuts as responsible.
OPEC also did an upward revision of its forecast for production from rivals who have benefited from higher oil prices.
U.S. shale oil output has been booming over the past year since OPEC reduced its own production in tandem with Russia to prop up global oil prices.
But as oil production collapsed in Venezuela and is still facing hiccups in countries such as Libya and Angola, the oil exporters’ group is still producing below its targets meaning the world needs to use stocks to meet rising demand.
OPEC said in its monthly report on Thursday, that oil stocks in the developed world reversed a rise in January to fall by 17.4 million barrels in February to 2.854 billion barrels, around 43 million barrels above the latest five-year average.
“We have achieved an over 150 percent conformity level,” OPEC Secretary-General, Mohammad Barkindo, told Reuters in New Delhi, referring to OPEC’s commitments under the supply-cutting pact. He said the glut has effectively shrunk by nine-tenths since the start of 2017.
“We have seen an accelerated shrinkage of stocks in storage from unparalleled highs of about 400 million barrels to about 43 million above the five-year average,” Barkindo said.
Stock levels are now 207 million barrels below their level in February 2017, with crude stocks in a surplus of 55 million barrels and product stocks in a deficit of 12 million.
“Looking forward, a healthy global economic forecast for 2018, positive car sales data in recent months, stronger 2018 year-on-year U.S. product consumption in January and potentially tighter global product markets are expected to boost gasoline and distillates demand,” OPEC said.
“High conformity levels observed by OPEC and non-OPEC producing countries should further enhance market stability and support crude and product markets in the months ahead.”
The 14-member, Vienna-based producer group said its collective output, according to secondary sources, fell 201,000 bpd to 31.96 million bpd in March from February, driven by declines in Angola, Algeria, Venezuela, Saudi Arabia and Libya.
The figure is below the 32.6 millio bpd that OPEC sees as demand for its crude for the whole of 2018.
OPEC, Russia and several other non-OPEC producers began to cut supply in January 2017. The pact runs until the end of the year and OPEC meets in Vienna in June to decide on its next course of action.
OPEC’s leader, Saudi Arabia, has said it would like the pact to be extended into 2019.
“There is growing confidence that the declaration of cooperation will be extended beyond 2018,” Barkindo told Reuters. “Russia will continue to play a leading role.”
On Thursday, OPEC also revised its forecast for supply growth from its rivals, non-OPEC, which is now forecast to grow by a further 80,000 barrels per day this year to 1.71 million bpd, driven largely by higher-than-anticipated growth in the first quarter in the United States and the former Soviet Union.
At the same time, it increased its forecast for global oil demand growth for this year by 30,000 bpd to 1.63 million bpd.
“This mainly reflects the positive momentum in the OECD in the 1Q18 on the back of better-than-expected data, and supported by development in industrial activities, colder-than-anticipated weather and strong mining activities in the OECD Americas and the OECD Asia Pacific,” it said in the monthly market report.