Opec still pumping too much oil
Group’s production exceeds demand despite recent cuts, report shows
Opec’s first assessment of world oil markets in 2018 showed that, despite cutting output, the group is still pumping too much crude.
Even though the Organisation of Petroleum Exporting Countries delivered on pledges to reduce supply, its output exceeded demand in the first half of this year, according to a report from the group. Its production was 32.6 million barrels a day in June. With US oil producers leading a pickup in rival supply, that’s also higher than the 32.2 million a day Opec expects will be needed in 2018.
Oil prices have slumped into While the organisation and its partners have agreed to persevere with their cuts until the end of March, figures in the report suggest they would need to make deeper reductions to balance the market in 2018. If current output were sustained, Opec will oversupply world markets by about 900,000 barrels a day in the first quarter of next year. a bear market on concern that production cuts implemented by Opec and Russia since the start of the year aren’t deep enough to clear a global glut, while US shale-oil producers are gearing up to fill in any shortfall. Producers will meet later this month in St. Petersburg to review their progress, although deeper cuts aren’t on the agenda.
The report from Opec’s Vienna-based research department indicates that the accord didn’t go far enough, which could go some way to explain the lack of a sustainable price rally following the cuts. Despite delivering on its commitment to reduce output, the organisation was still oversupplying world markets by about 700,000 barrels a day in the first half of this year.
Still, the report also contained evidence that the cutbacks are having some effect. Oil stockpiles in developed nations fell in May, reducing their surplus over the five-year average to 234 million barrels. By keeping production at June levels, the organisation would reduce the global surplus by about 70 million barrels in the second half.