The International Energy Agency (IEA) has reported that, as analysts had predicted, the Organization of Petroleum Exporting Countries (OPEC) and other major oil producers have complied with the agreement to restrict oil production. In total, OPEC reached 90 percent compliance, a record for the group. Global oil supply declined by 1.5 million barrels per day in January, with two-thirds of the decline coming from OPEC members.
In response to the contraction in supply, oil prices rose. Brent crude rose by one percent on Friday to $56.21 and West Texas Intermediate rose one percent as well to $53.54.
Not all member states, however, contributed equally as some struggling nations such as Venezuela and Iraq fell well short of their targets. Larger than usual cuts by Saudi Arabia, Qatar, and Angola more than offset them, with Saudi Arabia alone decreasing production by 70,000 barrels per day above its requirements.
These nations’ efforts plus increasing demand for industrial use, therefore, strongly contributed to the price increase. Although, concerns in the markets over future production and reserves have prevented the cuts from rebalancing the market. The IEA has noted that oil stocks still remain high, and Saudi Arabia does not plan on continuing to cut production for the second half of 2017. For the time being, prices per barrel are expected to remain in the $50 range. It remains to be seen whether the production cuts will have a significant impact on the fuel prices consumers pay at the pump.
Image Source: Organization of Petroleum Exporting Countries