OPEC Still Cuts More Than Oil Pact Demands

A global oil glut has been virtually eliminated, figures published by OPEC showed on Monday, thanks to an OPEC-led pact to cut supplies that has been in place since January 2017 and due to rising global demand. Despite this, OPEC’s latest report said producers were cutting more than required under the deal, while producers not party to the agreement, such as US shale companies, were starting to face constraints on future output, Reuters reported.

Saudi Arabia, the world’s biggest oil exporter and leader of the Organization of Petroleum Exporting Countries, told OPEC it cut output in April to its lowest level since the supply deal began in January 2017. The OPEC report said oil inventories in the Organization for Economic Cooperation and Development's member states in March fell to 9 million barrels above the five-year average, down from 340 million barrels above the average in January 2017.

“The oil market was underpinned in April by renewed geopolitical issues, tightening product inventories and robust global demand,” OPEC said in its report.

The deal between OPEC, Russia and other non-OPEC producers has helped oil prices rise 40% since it took effect.

Brent crude futures, the international benchmark for oil prices, stood at $78.21 per barrel on Tuesday, virtually unchanged from their last close and not far off a three-and-a-half year high of $78.53 a barrel reached the previous session, CNBC reported.

US West Texas Intermediate crude futures were at $70.88 a barrel, down 8 cents, though still not far from their Nov. 2014 high of $71.89 a barrel reached last week.

The main goal of the supply deal was to reduce excess oil stocks to the five-year average. But oil ministers have since said other metrics should be considered such as oil industry investment, suggesting they are in no hurry to end supply cuts.

Indeed, the report showed OPEC for now is cutting more supply than the group has pledged under the pact.

OPEC output rose by just 12,000 barrels per day to 31.93 million bpd in April, according to figures collected by OPEC from secondary sources. That is roughly 800,000 bpd less than the amount OPEC says the world needs from the group this year.

Figures reported directly from OPEC members showed even deeper declines in production.  Venezuela, whose output has plunged due to an economic crisis, told OPEC its production fell to 1.505 million bpd in April, believed to be the lowest in decades.

Top exporter Saudi Arabia told OPEC it cut output by 39,000 bpd to 9.86 million bpd, which is the lowest since the supply cut deal began, based on figures Riyadh reports to the group.