OPEC’s Improved Forecast on Market Recovery Depends on Compliance With Oil Deal

© REUTERS / Sergei KarpukhinA worker at an oil field owned by Bashneft, Bashkortostan, Russia
A worker at an oil field owned by Bashneft, Bashkortostan, Russia - Sputnik International
The realization of the Organization of the Petroleum Exporting Countries’ (OPEC) revised prognosis for oil market balance recovery by mid-2017 hinges on the level of adherence to the agreement on oil production curtailment between the cartel and 11 other major oil producers, the International Energy Agency’s (IEA) press office told Sputnik.

A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the West Siberian city of Kogalym, Russia, January 25, 2016 - Sputnik International
Most Countries Fully Implementing OPEC Oil Cap Deal – Russian Energy Minister
MOSCOW (Sputnik) — On Sunday, the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) revised upward its prognosis for the oil market rebalancing, stating it could be rebalanced not in the third or fourth quarter of the year, but already by mid-2017.

"If OPEC implements its production accord the market will probably balance in the first half of 2017. The level of compliance with the agreement holds the key," Jon Custer, an IEA media coordinator, said, when asked if the indicators for the JMMC positive prognosis were to be brought to reality.

According to the IEA, it would not be possible to immediately have a clear picture of the implementation of the oil cuts deal, which entered into force merely three weeks ago on January 1.

The press office also noted that statistics usually provided on the OPEC oil output levels by independent agencies considered as secondary sources were not completely accurate, as the data were mainly based on export and domestic crude oil use estimates.

On the Sunday meeting, the JMMC agreed to monitor compliance based only on production data presented monthly by the deal participants and on statistics collected by independent secondary sources, such as Argus, Platts, CERA, as well as the IEA.

"Independent production numbers for OPEC countries are largely based on export data plus estimates of domestic crude oil use. Over time, this will give us an accurate picture of production levels, but the data is not perfect," Custer said when asked if a range of sources on production data announced by the JMMC would show a clear and unbiased picture of obedience to the oil cut deal.

The IEA reiterated that the agency published the cartel’s oil production estimates on a regular monthly basis that were freely available to OPEC to verify production levels and the compliance with its output agreement.

The cartel sealed a deal on November 30, 2016, agreeing to cut its oil output by 1.2 million barrels per day for the first six months of 2017 in an effort to stabilize the oil market and bring oil prices to the healthy range of $50-60 per barrel. Eleven non-OPEC countries, including Russia, Mexico and Kazakhstan, later joined the deal, pledging to reduce production by 558,000 barrels per day on a voluntary basis.

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