OPEC out­put cut may has­ten oil mar­ket re­bal­ance: IEA

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The over­sup­plied oil mar­ket will be re­bal­anced ear­lier than ex­pected if ma­jor crude pro­duc­ers im­ple­ment a deal to cap out­put when they meet next month, the In­ter­na­tional En­ergy Agency chief said.

Un­der cur­rent con­di­tions, the IEA ex­pects global out­put to ex­ceed de­mand un­til the sec­ond half of 2017, Fatih Birol told jour­nal­ists on the side­lines of an en­ergy con­fer­ence in Sin­ga­pore. “But we know that the pro­duc­ers are think­ing of in­ter­ven­ing in the mar­kets. The OPEC and non-OPEC pro­duc­ers, if they in­ter­vene in the mar­kets, this re­bal­ance can be ear­lier than the sec­ond half of 2017,” he said.

In a sur­prise move, OPEC (Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries) mem­bers led by oil king­pin Saudi Ara­bia agreed on a deal to trim pro­duc­tion, send­ing crude prices surg­ing.

The OPEC deal which aims to sta­bilise prices is the first to limit pro­duc­tion since 2008 but de­tails will only be de­ter­mined dur­ing the group´s meet­ing on Novem­ber 30 in Vi­enna.

Iran, Saudi Ara­bia´s bit­ter geopo­lit­i­cal ri­val, was ex­empted from the cuts as it is still ramp­ing up pro­duc­tion de­pleted by years of crip­pling Western eco­nomic sanc­tions lifted only in Jan­uary.

Pro­duc­tion has out­paced de­mand over the past two years, with the re­sult­ing sup­ply glut ham­mer­ing prices from highs of more than $100 a bar­rel in June 2014 to near 13-year lows be­low $30 in Fe­bru­ary this year.

Prices are cur­rently hov­er­ing above $50 a bar­rel ahead of next month´s OPEC meet­ing. But some an­a­lysts say Iraq´s re­cent in­sis­tence that it should also be ex­empt from the cuts could de­rail im­ple­men­ta­tion of the deal. Iraq´s oil min­is­ter Jab­bar Al-Luaibi said his coun­try should not par­tic­i­pate be­cause it is wag­ing a war against Is­lamic State mil­i­tants.

“There is grow­ing scep­ti­cism that OPEC will be able to cut a deal. Iraq´s oil min­is­ter has in­sisted that the coun­try re­main ex­empt from a freeze and aims to in­crease pro­duc­tion,” said Alex Furber, an an­a­lyst with CMC Mar­kets in Sin­ga­pore.

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