PARIS – The next few weeks will give investors an insight into whether the production cuts by OPEC and non-OPEC countries will be fully implemented, and will be a crucial period for oil prices, according to a new monthly report by the International Energy Agency (IEA).
In February of this year, the agency had projected that global oil demand would decline in 2016.
“For contractual and logistical reasons, we might initially see that the output cuts do not fall neatly into place,” the Paris-based organization was quoted to say by CNBC.
“The deal is for six months and we should allow time for it to be implemented before re-assessing our market outlook,” the IEA added. “Success means the reinforcement of prices and revenue stability for producers after two difficult years; failure risks starting a fourth year of stock builds and a possible return to lower prices.”
After several meetings this year, OPEC countries decided to cut production by 1.2 MMb/d starting in January. Non-OPEC members, such as Russia, joined the efforts earlier this month.
The agency added in the report that as OPEC was deciding to cut production last month, its crude output in November was 34.2 MM b/d – a record high – and 300,000 b/d higher than in October.
The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 MMb/d for 2016, 120,000 b/d above the previous forecast. Growth in 2017 is now seen at 1.3 MMb/d, an increase of 110,000 b/d from its previous estimate.