Barkindo: OPEC, non-OPEC nation committed to restore market stability

Owen Stevens
April 21, 2017

USA crude production rose to 9.252 million barrels per day from 9.235 million barrels in the week prior, continuing a strong rebound, according to EIA.

Crude fell in the previous two sessions, but it received a boost from comments on April 19 by the secretary-general of OPEC that the group was committed to cutting inventories to the five-year average.

Crude traders and investors in Asia also had their first chance to assess a 13th consecutive increase in the rig count by drillers of US shale oil.

While compliance has been strong among OPEC countries, production cuts have lagged among others that have agreed to act to curb oil prices, including Russian Federation.

Global benchmark Brent crude futures were down 26 cents at $55.10 a barrel at 0803 GMT.

Members of the Organization of the Petroleum Exporting Countries are cutting oil production by 1.2 million bpd from January 1 for six months, the first reduction in eight years.

US West Texas Intermediate (WTI) crude futures were up 12c, or 0.2%, to $50.56 a barrel. That may be about to change, said BMI Research."Non-OPEC compliance will improve over the next two months with Russian Federation driving the largest reductions in volume terms", BMI said.

Oil dropped to the lowest in more than a week on signs U.S. output is rebounding, undermining OPEC's efforts to clear a global glut.

Oil prices fell by nearly 4% in the USA session, marking the steepest drop since March 8.

The increasing production in the United States is one of the biggest threats to the recovery in oil price as well as to the ability of the OPEC deal to curb supplies in the market. The producers need to extend their deal to cut supplies through the end of the year amid concerns that Russian Federation is lagging behind on its pledged reductions, the bank said.

Traders said that the rising U.S. crude production posed a concern that the oil supply overhang would continue, while the jump in petrol stocks implied a stutter in demand.

This is the quandary for these petrostates: cut too much and they'll be handing the market on a silver platter to upstart frackers, but cut too little and cheap crude will bleed their oil-soaked coffers dry.

The IEA report pegged total Opec output at 31.68 mbpd in March, down 0.36 mbpd from February and suggested a compliance of 99 per cent. Non-Opec compliance improved from 38 per cent to 64 per cent in March as per the IEA.

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