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Kuwait Sees Oil Glut Easing

Kuwait Sees Oil Glut EasingKuwait Sees Oil Glut Easing

Crude oil inventories will decline at a faster pace worldwide in the second half of the year, as demand increases and OPEC members comply better with a global agreement to cut output, Kuwait’s OPEC Governor Haitham al-Ghais said.

The Organization of Petroleum Exporting Countries and other major producers, including Russia, agreed in May to extend their supply-cut deal through March 2018 because stockpiles had not fallen to their five-year historical average—the goal of the agreement.

Yet for the past two weeks, US crude inventories have declined, exceeding analyst expectations, Bloomberg reported.

“I see this trend continuing with more conformity from OPEC and non-OPEC producers, coupled with a further growth in demand,” said al-Ghais, who was appointed Kuwait’s OPEC governor last month.

It would be “illogical” for OPEC to change strategy now, he said in a phone interview in Istanbul. Kuwait leads the committee monitoring the output curbs.

OPEC’s compliance with the supply cutbacks fell in June to the lowest level since the deal started in January, the International Energy Agency said on Thursday.

Rising production from OPEC is threatening a rebalancing of the market, with the group’s output last month at the highest level this year, the IEA said.

Benchmark Brent crude prices have slumped this year amid concerns that increased supply from Libya, Nigeria and the US is negating the impact of OPEC’s cuts.

Concerns that supplies will keep climbing in Libya and Nigeria, both exempt from the cuts deal, are “not justified” because their production is fluctuating within a range of 300,000 to 500,000 barrels a day on average, al-Ghais said.

“We need to see if these increases will be sustained and stable,” he said. Libya’s production has risen to 1.05 million barrels a day, a person with direct knowledge of the matter said. That is the highest level since June 2013, according to data compiled by Bloomberg.

Nigeria is producing 1.7 million barrels a day, according to its Oil Minister Emmanuel Kachikwu. The nation’s output has climbed 17% this year, data compiled by Bloomberg show.

 

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