OPEC’s deal with Russia and other non-OPEC producers to cut oil production appears to be successful as the global oil market is rebalancing, said the International Energy Agency.
In its latest Oil Market Report published on Tuesday, the IEA found that total OECD oil supplies fell by around 1 million barrels per day.
“In the first quarter of 2017, we might not have seen a resounding return to deficits but this report confirms our recent message that re-balancing is essentially here and, in the short term at least, is accelerating,” the IEA said.
The Paris-based organisation said if OPEC maintained its current level of crude production in the second quarter, global supplies should start declining by 700,000 barrels per day.
However, the report warned that much more needed to be done to drain the chronic oversupply in the second half of the year.
“If, as a scenario and not a forecast, the current [OPEC] output cuts were to be extended for the rest of 2017, oil stocks would start to fall quite sharply,” Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC.
“But because they are falling from such a great height, they won’t get down to the five-year average until much later in the year and possibly not then.”
The report came nine days before OPEC’s ministerial meeting, which is expected to extend the period of production cut from next month to the end of March 2018.