The International Energy Agency (IEA) claims that the production cap of around 1.2 million barrels a day from OPEC and Russia has helped put a line under global oil prices at around $US60 a barrel.
In its monthly report, the IEA said “The agreement aims to achieve relative stability and to bring the market towards balance. So far, the Brent crude oil price seems to have found a floor.”
Brent is trading around $US60 a barrel, West Texas Intermedia (the US marker crude) around $US51 a barrel.
In October, Brent hit $US86 a barrel on concerns the market could face a squeeze as US sanctions against Iran took effect. But prices fell under $US60 as producers stepped up output (at Donald Trump’s urging) overcompensated for the supply loss.
IEA said that for the Saudis and Russia, “prices falling further would place their budgets under great stress. Such volatility is not in the interests of producers or consumers.”
The IEA maintained its oil demand growth estimates for 2019, saying it will increase by 1.4 million barrels a day (m b/d) to 100.6 m b/d, as lower prices are offset by weaker economic growth and currency pressures.
Global oil supply fell 360,000 b/d in November from October to 101.1m b/d due to lower output in the North Sea, Canada and Russia.
Opec output rose to 33m b/d in November with Saudi Arabia and the UAE reaching record highs and more than offsetting the sanctions- caused losses from Iran.
“For non-OPEC supply, we have revised our growth forecast for 2019 down by 415 kb/d, partly due to expected cuts from Russia agreed last week, and to lower growth in Canada. The serious build-up of stocks arising from logistical bottlenecks in Alberta led the provincial government to act very decisively to curb output.
“The initial cutback of 325 kb/d for three months to allow blockages to ease is a significant development. Apart from lowering production, it should narrow the differential between West Canadian Select prices and WTI, which reached $51/bbl at one point,” the Agency said.
