London: Organization of Petroleum Exporting Countries (Opec) and its allies improved their collective compliance with a supply-cuts agreement last month as deeper reductions from members of the group offset weaker implementation from other producers.
The group of oil producers implemented 94% of their pledged 1.8 million barrels a day of supply cuts in February, up from 86% the previous month, according two delegates familiar with the conclusions of a meeting of a technical committee at the Vienna headquarters of the Opec on Friday.
The 11 Opec members—excluding Nigeria and Libya—participating in the agreement exceeded their pledges, implementing 106% of the required cuts, the delegates said. The compliance rate of non-Opec nations, which includes Russia and Kazakhstan, was 64%, one delegate said, compared with the 66% that the committee saw last month.
Opec and its allies are almost three months into a deal to reduce production in a bid to eliminate a global oil-inventory surplus after three years of glut. The agreement is set to last six months through June, but several Opec members are signaling an extension may be necessary. The group will decide whether to prolong the cuts at a meeting in Vienna on 25 May.
The compliance numbers are “exceptional,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. However, “physical markets are not feeling the effects yet.”
Oil prices initially rallied after last year’s historic deal, but erased most of their gains last week amid worries that the price recovery was spurring a revival in US shale oil production. Prices recovered slightly this week after government data showed US crude stockpiles declined for the first time this year, although drilling in the nation continues to expand.
Saudi Arabia’s oil minister, Khalid Al-Falih said Thursday that Opec would extend the cuts after they expire in June if oil stockpiles remain above the five-year average.
“Oil prices will not react unless we see a meaningful decline in U.S. oil inventories,” said Anas Alhajji, an independent analyst and former chief economist at NGP Energy Capital Management. Bloomberg