OPEC output cuts under scrutiny as market tightens: IEA

Thu Jan 19, 2017 7:20am EST
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By Christopher Johnson

LONDON (Reuters) - World oil markets are slowly tightening as demand rises while investors wait to see if production cuts agreed by OPEC and other producers will be implemented as promised, the International Energy Agency (IEA) said on Thursday.

In its monthly oil market report, the IEA said output cuts announced by the Organization of the Petroleum Exporting Countries and 11 non-OPEC producers in November had "entered their probation period".

OPEC agreed in November to cut production by 1.2 million barrels per day (bpd) to 32.5 million bpd for the first six months of 2017, together with another 558,000 bpd in cuts from the likes of Russia, Oman and Mexico.

"It is far too soon to see what level of compliance has been achieved," said the IEA, which advises advanced industrial economies on energy policy. "The market awaits the outcome of the output deal."

Meanwhile oil stocks are falling and demand is rising.

Commercial oil inventories in the major industrialized countries fell for a fourth consecutive month in November, the IEA said, although they remained more than 300 million barrels above the five-year average. In July last year, OECD commercial stocks hit a record high of 3.101 billion barrels.

The agency said stronger oil consumption had led it to raise its estimate of global oil demand growth over the last year by 110,000 bpd to 1.5 million bpd, well above the average rate of growth seen in this century of 1.2 million bpd. Global oil demand growth hit a five-year peak of 1.8 million bpd in 2015.

This year the agency expects world oil demand growth of around 1.3 million bpd.   Continued...

A flag with the Organization of the Petroleum Exporting Countries (OPEC) logo is seen before a news conference at OPEC's headquarters in Vienna, Austria December 10, 2016. REUTERS/Heinz-Peter Bader