Non-Opec Production Agreement Raises As Many Questions As Answers

The 10 December finalization of an agreement between key non-Opec producers and Opec to cut production by almost 1.8mn b/d is set to hasten the market’s rebalancing, the IEA and Opec both agree. Both have also revised upwards their forecasts for global demand in 2017 in their monthly oil market reports for December, further contributing to expectations that the world is finally about to start drawing down record oil stocks.

But the extent of the deal’s impact remains highly uncertain due to the high number of variables in play. This is partially highlighted in the considerable variation between the IEA and Opec projections. The IEA’s Oil Market Report indicates a major stock drawdown beginning in Q1 2017, while Opec’s Monthly Oil Market Report expects a more gradual drawdown getting underway in Q3. While the IEA figures indicate demand exceeding supply by around 640,000 b/d next quarter, Opec numbers suggest 1.14mn b/d excess supply in the same period (see table). (CONTINUED - 885 WORDS)

DATA INSIDE THIS ARTICLE

table IEA Supply & Demand Forecasts December 2016 (Mn B/D)
table OPEC Supply & Demand Forecasts, December 2016 (Mn B/D)