In a monthly report issued this week, the International Energy Agency said OPEC production has slowed, declining by 320,000 barrels a day to 33.09 million barrels in December.
Crude futures gained traction on Friday, driven by a weaker USA dollar and signs of the market tightening after major oil producers agreed to cut output.
The Organisation of Petroleum Exporting Countries agreed to reduce its supplies by 1.2 million barrels a day starting this month at a November 30 meeting, while 11 non-members including Russian Federation and Kazakhstan pledged less than two weeks later to curb output by nearly 600,000 barrels.
OPEC production cuts may have helped propel prices higher, but that doesn't necessarily mean that they are the primary driver for increased USA shale production, the International Energy Agency stated to Bloomberg.
Eleven non-cartel members participating in the oil output cut deal are Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan.
Judging by early indications, de facto OPEC leader Saudi Arabia is showing production restraint, cutting supply by at least 486,000 barrels a day since October. IEA data showed oil storage in industrialized nations of the Organization for Economic Cooperation and Development fell in November.
Mark Andrews, UK head of oil and gas at KPMG said much will hinge on the stability of oil prices.
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"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.
The agency added that it still expects the global demand growth rate to fall back to 1.3 million bpd this year.
This US Energy Department data sharply contradicted an inventory report from the American Petroleum Institute (API) late Wednesday that showed a drop of 5 million barrels in US crude supplies for the same week.
Birol's comments suggest the IEA has become more optimistic about the outlook for USA production, Kallanish Energy learns.
It is unclear, at this point, how rising USA supply and falling OPEC output will ultimately balance out.
And that newly increased supply could weigh on oil prices. U.S. oil production is going to significantly increase this year, posing a downward pressure on crude prices. The committee now has no plans to use external agencies, such as consultants that track oil exports by monitoring tanker movements, to verify that countries are implementing the pledged supply curbs, said three people familiar with the matter. USA crude oil supplies are on track to rise by 140,000 bpd as higher prices and increased investments spur new light tight oil growth, the IEA has forecast.