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IEA Says OPEC’s Effort At Production Cut Has Helped To Nearly Remove Oil Glut

IEA Says OPEC’s Effort At Production Cut Has Helped To Nearly Remove Oil Glut
According to the International Energy Agency the global oil glut is all set to be finally cleared – a problem that had resulted in the global oil industry going through its worst crisis ever since the middle of 2014, by OPEC.
The agency said that there has been a drop in global oil inventories and only about 10 per cent of its till remains primarily because of the huge production cuts that OPEC had initiated with cuts ultimately being made for more oil production than the oil cartel had wanted amidst growing demand. The amount of production cuts by OPEC’s largest member Saudi Arabia was more than had been expected because of unplanned losses and the oil production lowering in Venezuela because of its economic troubles were the drivers for this lowering of inventory.
The surplus that had been created by increase in production in the U.S. has been attempted to be offset by the Organization of Petroleum Exporting Countries and Russia in a combined effort since the beginning of last year. earlier this week, oil futures hit a three-year high in New York and moved closer to $70 a barrel because supplies were threatened by political tensions in the Middle East.
“It is not for us to declare on behalf” of OPEC “that it is ‘mission accomplished,’ but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its monthly report. Most of the major economies of the world are advised on their energy policies by the Paris-based agency.
The IEA said that compared to their five-year average there is just about 30 million barrels of excess oil in the inventories in developed nations. This is the parameter that OPEC is putting to use for measurement of the balance in the global oil market. when the production cuts were started, the excess inventory was over 300 million barrels.
Starting this quarter till the end of the year, there would be a decrease of 600,000 barrels a day in the volume of global inventories. And hence it is being expected that the global inventory would fall below the five-year average whe3n data is released in the next month or two.
Saudi Arabia has been arguing in favor of the continuation of the production cuts on the basis that such cuts are needed further to make sure that there is proper rebalancing in the market and therefore the largest oil producing country is interested to revise the tagret that had been set by OPEC. Alternative metrics that sieve out excessively-high stockpiles seen in recent years have been examined by producers who are slated to meet in the Saudi city of Jeddah next week.
The actual cuts in production was higher by 60 per cent of the target of about 1.2 million barrels a day – which the members of the oil cartel had agreed upon to undertake. The lowest production in almost three years in the production of oil by the 14 members of the OPEC was noted ion March at about 31.83 million barrels a day.

Christopher J. Mitchell

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