Oil stocks still excessive despite landmark deal

ISTANBUL: A historic deal between Opec and non-cartel members to slash output to boost prices has so far failed to produce the expected results with stocks remaining excessive, the group’s secretary general said.
In an unprecedented step last year, Opec and other key non-members including Russia agreed to slash output by 1.8 million barrels a day to boost the price of oil which has plummeted over the last three years.
But despite high levels of compliance, oil remains priced stubbornly low at around $45 a barrel to the dismay of Opec.
Opec Secretary General Mohammed Barkindo said there had been “high expectations” that markets would respond to the deal in 2017, but so far these had not been realised.
He said producers had “faced headwinds” in the shape of a cyclical drop in demand but also a resurgence in supplies from non-Opec producers not party to the deal, notably from the booming shale oil industry in the United States.
“This combination… impacted heavily on the world oil market,” he told the World Petroleum Congress in Istanbul.
Due to the surge in supplies from non-Opec producers, the expected decrease in global energy stocks did not proceed at a “fast enough pace”, he said.
But he praised all participants in the deal, saying that the compliance — the implementation of the pledges made in the accord — was “unprecedented” and over 100 per cent.
Barkindo said: “It’s been a very challenging first half of the year, but we are on course going forwards and we are solid in our decisions on the implementation.”
He expressed optimism that more stocks would be used up — thus pushing up prices — as demand picks up in the second half of the year.
“We expect the drawdown to gather more steam,” Barkindo said. “We remain very optimistic that we are on course to helping the market to rebalance itself.”
He confirmed that Opec and non-cartel members will meet later this summer in Saint Petersburg to review the current market conditions.
Crucially, the United States is not a party to the deal, meaning that its shale production can continue uninhibited. In an effort to tighten coordination, Barkindo said Opec had held “very useful preliminary meetings” with US shale producers and these talks would be continued.— AFP