OPEC pumped more oil in July as global oil supplies rose for
the third straight month, the IEA said Friday, giving figures that cast further
doubt on the cartel’s pledge to cut output to raise prices.
In its monthly report on the global oil market, the
International Energy Agency said, however, that it believes the supply glut is
easing, partly because demand is growing faster.
“There would be more confidence that re-balancing is here to
stay if some producers party to the output agreements were not… showing signs
of weakening their resolve,” the IEA said.
OPEC and a number of other producers including Russia agreed
late last year to cut production to ease oversupply and support the price of
crude. In May they extended those cuts into 2018.
However, the effort has been undermined by a number of
countries failing to honour their pledges to reduce output.
“The compliance rate with OPEC’s output cut fell again in
July to a new low of 75 percent from June’s revised figure of 77 percent,” said
the IEA.
For the non-OPEC countries that joined the pact, the
compliance rate edged up to 67 percent, the IEA said.
It found that the 22 countries bound by the pact are
producing about 470,000 barrels per day in excess of their commitment, while
global output was around 500,000 barrels higher in July than one year ago.
– ‘Convince the
market’ –
“If rebalancing is to be maintained, the producers that are
committed to seeing the task through to March 2018 need to convince the market
that they are in it together,” said the IEA.
“It is not entirely clear that this is the case today.”
Saudi Arabia and Iraq, OPEC’s top two producers, vowed
Thursday to strengthen their commitment to the production cuts.
While Saudi Arabia met its production limits in July, Iraq
only made one-third of the cut it had pledged, according to the IEA report.
The IEA found that global oil supply rose by nearly half a
billion barrels per day in July to 98.16 million barrels per day (mbd).
It raised its forecast for growth in demand this year, to
1.5 mbd, to an average daily demand 97.6 mbd.
“Producers should find encouragement from demand, which is
growing year-on-year more strongly than first thought,” said the IEA, adding
“from the producers’ viewpoint, strong growth reduces the stocks overhang.”
The production cut deal last year was a change of strategy
by OPEC, which led by Saudi Arabia had previously been pumping as much it could
in order to squeeze out higher cost competitors, in particular, shale oil
producers in the United States.
But US shale producers have proved more resilient, cutting
costs, with output now higher than before oil prices tumbled from above $100
per barrel in 2014.
While US oil firms have recently announced cuts to
investments, the IEA said it was sticking to its forecasts for output to
increase further thanks to gains in productivity.
Oil prices fell on Friday, with Brent crude down 39 cents to
$51.51 in London morning trading. WTI fell 41 cents to $48.18.
Oil prices have swung around $50 per barrel since the
OPEC-led deal came into place.
AFP
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