The International Energy Agency on Tuesday predicted higher oil demand next year, but was tentative about overall prospects as it noted Opec members pumped at a record rate last month ahead of their deal to cut output.
The Paris-based energy watchdog reflected widespread opinion that the effectiveness of the Opec deal at the end of November and the subsequent deal among some major non-Opec producers on Saturday, would depend on a strict adherence to terms.
"If Opec promptly and fully sticks to its production target … and non-Opec producers deliver the agreed cuts … then the market is likely to move into deficit in the first half of 2017 by an estimated 600,000 barrels per day," the agency said in its monthly report.
But it added: “This is not a forecast by the IEA, it is an assumption based on the numbers in Opec’s 30 November agreement, subsequently reinforced by the non-Opec producers.”
The UAE was among the first to announce supply cuts to customers, with Abu Dhabi National Oil Company on Tuesday telling Asian customers to expect supply to be between 3 and 5 per cent less in January, according to traders.
Kuwait and Qatar followed suit and Saudi Arabia is expected to do so too. But the IAE noted that Opec’s output in November was at a record 34.2 million barrels per day (bpd), up by 300,000 bpd on the month and 1.4 million bpd over the year.
“Opec’s cut to crude production of 1.2 million bpd almost matches its deliberate production increase of 1.3 million bpd in the 12 months to October [the month on which the Opec cuts are based], while the non-Opec group has seen its crude output fall in the same period by about 900,000 bpd,” the IEA noted.
Ed Bell, a commodities analyst at Emirates NBD in Dubai, said that any country that is party to the cuts will have tried to raise output as much as possible in the months leading up to the deal so they can at least show a decline in output.
“Adnoc, Kuwait and Qatar have warned importers to accept less from January,” he said.
“But these reports are also coming out at the same time that more and more oil is waiting to leave the US on its way to Asia.”
amcauley@thenational.ae
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