IEA: Compliance of OPEC+ with oil cut deal at 89% in May

MOSCOW, Jun 16 (PRIME) -- Compliance of the OPEC+ alliance with the oil output reduction deal under the new configuration reached 89% as the oil output fell by 9.4 million barrels a day in May with Saudi Arabia cutting production by 100% of the agreed level and Russia by 97%, the International Energy Agency (IEA) said in its June report on Tuesday.

“For its part, OPEC+ got off to a strong start during the first month of its historic 9.7 million barrels a day supply cut. The group reduced supply during May by 9.4 million barrels a day versus April, to deliver a compliance rate of 89%. Saudi Arabia and Russia achieved a rate at or near 100%, while other Gulf producers came in above 90%," the IEA said. Russia’s compliance with the deal stood at 97%.

Oil production in the U.S. decreased by a record 1.3 million barrels a day in May. It may fall by 0.9 million barrels in 2020 and by 0.3 million barrels more in 2021 if higher oil prices don’t stimulate investment in the shale oil sector, the agency said.

Global oil supply shrank by 11.8 million barrels a day in May due to a record output cut by OPEC and due to suspension of economies in the U.S., Canada, and other states. The global oil output should shrink to 86.4 million barrels a day in June, the lowest point since the beginning of 2010, the IEA said.

Commercial reserves of oil and oil products in countries of the Organization for Economic Cooperation and Development (OECD) rose by 148.7 million barrels to 3.137 billion barrels in April, exceeding their 5-year average figures by 208.3 million barrels, the agency said in the report.

The global oil production should contract by 7.2 million barrels a day in 2020 and rise by 1.7 million barrels in 2021 if the OPEC+ restrictions soften and if countries outside the alliance like Norway, Brazil, and Guyana actively raise their production, the agency said.

At the same time, the agency upgraded its forecast for the fall in oil output of countries outside OPEC in 2020, and it now expects it to shrink by 3.1 million barrels a day, up from 3.3 million barrels expected before. In 2021, production outside OPEC may rise only by 0.8 million barrels a day if there is no investment in short-term projects or if the OPEC+ alliance does not ease its restrictions.

The agency also downgraded its estimate for contraction of demand for oil in 2020 to 8.1 million barrels a day taking into account the 17.8 million barrel contraction in April–June and an 11.4 million barrel contraction in July–December. Demand in October–December would be lower by 3.8 million barrels year-on-year.

In 2021, demand for oil should jump by 5.7 million barrels a day, showing a record annual growth in the history as economies would be returning to their normal lives. Nevertheless, oil consumption should be lower by 2.4 million barrels than consumption in 2019 due to low demand for jet fuel and kerosene.

The expected increase of oil supply of 1.7 million barrels in 2021 is not even close to the forecasted increase in demand, so the market provides opportunities for expansion of oil production faster than foreseen by the OPEC+ alliance, or the U.S. or other non-OPEC states may restore their production faster than expected, the IEA said.

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