Opec cut key to market rebalancing

> Oil glut will last well into 2017 unless cartel fulfils pledge to reduce output: IEA

PARIS: A massive oil glut may weigh on world markets deep into next year unless the Organisation of the Petroleum Exporting Countries (Opec) makes good on its promise to cut output, the International Energy Agency (IEA) said yesterday.

The oil price has recovered steadily since the oil cartel said last month that it would reduce production, with details to be hammered out at the cartel’s November meeting, and such a deal would “speed up the process” of working off global oil inventories, the IEA said in its monthly report.

“Even with tentative signs that bulging inventories are starting to decline, our supply-demand outlook suggests that the market – if left to its own devices – may remain in oversupply through the first half of next year,” the IEA said. “If Opec sticks to its new target, the market’s rebalancing could come faster.”

Initially greeted with scepticism among analysts, Opec’s agreement to cut output has gained traction in the oil market, with the IEA noting that the oil price has risen by 15% since the cartel’s announcement on Sept 28.

However, oil prices fell almost 2% yesterday, retreating from one-year highs, after mixed responses by Russian oil industry officials towards Opec’s call for all major crude producers to cut output.

Brent was down US$1, or 1.9%, at US$52.14 (RM217.55) a barrel by 1541 GMT, off the oneyear high of US$53.73 hit on Monday.

US West Texas Intermediate crude slipped 90 cents, or 1.8%, to US$50.45.

Igor Sechin, Russia’s most influential oil executive and the head of Rosneft, told Reuters in an interview his company will not cut or freeze oil production as part of a possible agreement with Opec. – Agencies