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Opec compliance ‘lowest yet’: IEA

Total Opec output is only 230,000 bpd down with Libya and Nigeria pumping more, but ‘market is re-balancing’

The rate of compliance among Opec members that committed to curbing output in an attempt to stabilise oil markets has dropped to its lowest level yet, according to the International Energy Agency (IEA).

Despite the dwindling compliance rate, the global market “is re-balancing”, although total global demand will pierce the 100 million barrels per day barrier at the end of next year.

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Compliance among the 12 participating Opec members in the output cut drive fell to a new low of 75% last month, the IEA said in its latest oil market report. This was down from 77% in June.

Total Opec crude output was up 230,000 barrels per day last month to a new high since the output cuts of 32.84 million bpd due largely to the “dramatic” production increase in Libya, the IEA said.

In fact Libya and Nigeria – neither of which are party to the cuts – account for around 70% of the 960,000 barrels per day output increase since March, meaning total Opec production is only down 230,000 bpd.

The level of compliance among the non-Opec nations, led by Russia, that are participating in the output cuts was just 67% last month, meaning the 22 participating Opec and non-Opec producers are actually pumping 470,000 bpd in excess of what they committed to, the IEA said.

Global oil supply last month was up 520,000 on June to 98.16 million bpd, also up 500,000 bpd on a year earlier. Non-Opec supply was up 200,000 bpd to 58.3 million, with Canada, the US, Brazil and Kazakhstan all standing out as higher producers. It was the third consecutive months of supply increases.

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Oil demand growth has been revised up to 1.5 million bpd, reaching 97.6 million bpd this year. For next year the growth will slow slightly to 1.4 million bpd to an average of 99 million bpd for the year, but reaching 100.1 million bpd in the final quarter.

“The market is re-balancing,” the IEA said. “Brent crude oil prices have recently stabilised above $50 per barrel following a period a few weeks ago when, as we said in last month’s report, there was “waning confidence” in the market.

“If re-balancing 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. It is not entirely clear that this is the case today,” the IEA warned.