Barkindo: OPEC was Anticipating Revival in Libya, Nigeria, Iran Oil Production

Barkindo: OPEC was Anticipating Revival in Libya, Nigeria, Iran Oil Production

This month, there are two hitches: "a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement", the Paris-based IEA said. However, lasting price movements could be limited over the next year because some USA tight oil producers have used financial instruments to guarantee a price above $50/b for their expected production. U.S. crude oil prices rose on July 12, 2017, due to the massive fall in nationwide crude oil inventories. It's the lowest level since the agreement came into force in January.

Libya and Nigeria were both exempted from the cuts due to their internal strife, while Iran was allowed to raise production by 90,000 barrels a day as it was recovering from United States sanctions.

"For fellow OPEC members, who agreed to reduce production by 1.2 million bbl/d, to see their cut effectively diluted by almost two-thirds must be very frustrating, especially as their pact has, hitherto, been well observed by historical standards", the IEA said.

The rebalancing of the oil market is taking too long, the International Energy Agency (IEA) said in its Oil Market Report on Thursday. The build in total US petroleum inventories for the week ending June 2 was the largest for any week since 2008. Civil war and other violence caused Libyan production to declineby as much as 90% from its post-Qaddafi high of 1.5 million bpd in 2014. Daily and monthly average prices could vary significantly from this forecast because global economic developments and geopolitical events in the coming months have the potential to push oil prices higher or lower than the current Short-Term Energy Outlook (STEO) price forecast.

OPEC members are having trouble keeping their promises.

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As oil price weakens, so does high yield, and vice versa, but as Warren Estey, head of America's natural resources at Deutsche Bank sustained, increased volatility means less room for errors when markets become more efficient, even if the eventual profits can be sky high.

OPEC and top nonmembers will meet in Russian Federation on July 24 to discuss the effectiveness of the deal, as oil prices remain below the key $50 line.

USA crude oil production, meanwhile, has proven more resilient to historically low crude oil prices than initially expected as operators in the shale basins in the Lower 48 become more efficient. However, recently both countries have ramped up production, feared to offset the cuts implemented by the rest of the group. The EIA report showed inventories fell by 1.6 million barrels, compared with analyst' expectations for a 1.1 million barrel gain.

Overall compliance with the deal slumped to 78 percent in June, from 95 percent in May.

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