Steeper cuts in OPEC oil production are likely this month as producers increasingly implement a recent landmark deal aimed at stabilising oil prices, the IEA said Thursday.
“Initial indications are that a steeper (month-on-month) decline may be on the way in January,” said the International Energy Agency (EIA), which analyses energy markets for major oil consuming nations.
Under a landmark deal on November 30, aimed at reducing a global supply glut that depressed oil prices, the Organization of Petroleum Exporting Countries (OPEC) is meant to slash its output ceiling by 1.2 million barrels per day (bpd) to 32.5 million bpd, effective January 1.
On Wednesday, the cartel had said that its oil production fell in December but remains well above levels envisaged the deal.
However, steeper cuts would come this month as Saudi Arabia and nearby producers move to implement the agreed reductions, the IEA said.
“OPEC’s elevated supply during 2016 helped push global oil stocks to record levels and the explicit aim … of the deal is to speed the market’s return to balance by working off the excess,” the IEA said.
“Coordinated action with non-OPEC countries… could hasten the process.”
The IEA said the output cuts “have entered their probation period and it is far too soon to see what level of compliance has been achieved.”
“The coming weeks will provide more clarity.”
In the meantime, the IEA said it had revised upwards its estimate for global oil demand growth in 2016 and now saw growth at 1.5 mbd, “with most of the revision contributed by stronger European demand.”
“In 2017, however, we still expect the rate of growth for global demand to fall back to 1.3 mbd,” it continued.
“The prospect of higher product prices — assuming that the cost of crude oil rises in 2017 — plus the possibility of a stronger US dollar are factors behind our reduced demand growth outlook for this year.”