IEA: OPEC Compliance With Oil Cuts At Lowest Levels In Six Months

Energy Snapshot What Happened on July 3–7 2017

This month, there are two hitches: "a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement", the Paris-based IEA said.

The global cuts accord between OPEC and non-OPEC producers faced "headwinds" in the first quarter this year and didn't cause crude stockpiles to decline fast enough, Barkindo said.

A similarly-minded Bob Dudley, chief executive officer of BP, reiterated the familiar criticism that markets must stop taking into account data on a weekly basis, and that the harsh reality is inventory levels globally "are so high", discouraging him from any position other than crude prices remaining more or less where they are now.

A Saudi industry source also said the country planned to reduce shipments in August by more than 600,000 bpd, taking exports for that month to their lowest this year.

Nigeria's output had improved in recent months, after the government managed to end militant attacks on oil pipelines in the Niger Delta by opening peace talks with leaders in the restive oil hub.

Limiting the upside is rising US production, steady growth in producing oil rigs and rising production in Libya and Nigeria.

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Rising production from OPEC is threatening that progress, the IEA warned.

Lower crude oil prices have a negative impact on oil producers such as Hess (HES), Bonanza Creek Energy (BCEI), Carrizo Oil & Gas (CRZO), and Comstock Resources (CRK).

Losses picked up after the IEA released its monthly oil report (http://www.marketwatch.com/story/iea-raises-oil-demand-forecast-says-output-increased-in-june-2017-07-13), saying global oil supply in June rose by 720,000 barrels a day to 97.46 million a day, boosted by increased output from the Organization of the Petroleum Exporting Countries and non-OPEC producers such as the U.S. The U.S. Energy Information Administration (EIA) also reported that U.S. production rose last month.

The volume is below the OPEC benchmark production level of 1.8 million barrels set for Nigeria. Since oil is priced in USA dollars, cheaper crude could for instance be partially offset by a devalued domestic currency - as was the case with Russian Federation and the ruble. Since the shale revolution through 2000s, USA producers reached a production level that took the country from a net importer to a net exporter. The EIA report showed inventories fell by 1.6 million barrels, compared with analyst' expectations for a 1.1 million barrel gain. We will continue to be very active.

USA drillers went back to adding rigs last week: plus 7, marking a 24th week of increases out of the last 25 and bringing the total count up to 763, the most since April 2015.

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