Oil inventories keep rising despite global deal to cut supply: OPEC
OPEC said on Tuesday oil inventories had continued to rise despite a global deal to cut supply and raised its forecast of production in 2017 from outside the group, suggesting complications in the effort to clear a glut.
The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Russia and 10 other non-OPEC producers agreed to cut half as much.
But in its monthly report, OPEC said oil stocks in industrialized nations rose in January to stand 278 million barrels above the five-year average, of which the surplus in crude was 209 million barrels and the rest refined products.
“Despite the supply adjustment, stocks have continued to rise, not just in the U.S., but also in Europe,” OPEC said in the report.
“Nevertheless, prices have undoubtedly been provided a floor by the production accords.”
Oil prices LCOc1 fell after the release of the report to trade close to $50 a barrel, their lowest since November. Crude is still up from about $40 a barrel a year ago and a 12-year low near $27 reached in January 2016.
In the report, OPEC pointed to an increase in its members’ compliance with the deal.
Supply from the 11 OPEC members with production targets under the accord fell to 29.681 million bpd last month, according to figures from secondary sources that OPEC uses to monitor output.
That means OPEC has complied by more than 100 percent with its plan to lower output for those nations to 29.804 million bpd, according to a Reuters calculation. OPEC gave no compliance figure in the report.
But the report revised up its estimate of oil supply from producers outside OPEC this year, as higher oil prices following the supply cut help spur a revival in U.S. shale drilling.
Production outside OPEC is now expected to rise by 400,000 bpd, 160,000 more than previously thought. U.S. oil output in 2017 was revised up by 100,000 bpd.
