Reports confirm compliance to oil supply constraining OPEC deal

The Dollar Business Bureau 

Two months into the deal between major oil producing economies, meant to curb global oil supply, the member nations of OPEC and other countries like Russia have agreed to boost compliance, Mohammad Barkindo, the Secretary General of OPEC said, on February 21, 2017. 

Crude oil prices which fell to record lows of $30 a barrel in 2015-16 have risen considerably to $50-$60 in the last few months after oil exporting nations cartelised to project an artificial shortage by cutting their supplies. Their efforts to end the supply glut and bring oil prices back to highs of over $100/barrel, many say, are in vain. Especially because US production and export of oil has been on the rise, it is said that the Middle-Eastern nations no longer have a monopoly over the world oil economy. In fact, it was fears of emerging shale gas discoveries in US that forced countries like Saudi Arabia to enter price wars in late 2014. 

However, Barkindo, at the International Petroleum (IP) week hosted by Energy Institute, expressed cautious optimism citing return of confidence to the oil market. "It's work in progress, but the trend I think has commenced," he said, at the oil trading companies' yearly gathering in London. 

Starting from January 1, 2017, the OPEC nations have agreed to curb their oil supplies by 1.2 million barrels per day (bpd). Ten other oil producing countries including Russia have assented to a cut of half the amount. The Secretary-General also mentioned that the latest reports show compliance to the agreed supply cut, by all signatories of the deal. Russia and other countries outside OPEC are expected to further reduce their production in the future. 

"I am confident that the non-OPEC will also raise their level of conformity to bring it at par with OPEC," he said, explaining that a constraint on production was still new to non-OPEC countries and that they should be given more time to match up with the limits agreed upon by OPEC nations. 

He also said that it was too early to ascertain whether there would be a need to extend the supply constraints beyond the current 6-month period. Inventories are expected to significantly drop through 2017, he added.