The first data to show the full impact on international stockpiles from OPEC and Russia’s joint cutbacks indicated a decline of 28.3 million barrels, or 0.9 percent, in February, according to the organization’s monthly report. That still left a surplus of 268 million barrels the producers have said they are aiming to clear. OPEC also boosted estimates for rival supplies for a third month as shale drillers emerge from the industry’s two-year slump.
Crude prices dipped last month as U.S. stockpiles swelled to new records, fanning concern that cutbacks led by the Organization of Petroleum Exporting Countries and Russia were failing to clear the glut. Saudi Arabia is said to favor extending the measures into the second half in order to finish the job, in line with the view of fellow members such as Kuwait and Venezuela.
“Despite some downside risks, general expectations for demand growth for oil products in the coming months remain bullish,” according to the monthly report from OPEC’s Vienna-based secretariat. “Healthy demand, together with the high conformity observed in OPEC and non-OPEC production adjustments, should enhance market stability.”
OPEC boosted estimates for U.S. production growth by 200,000 barrels a day, to 540,000 a day as a recovery in investment helps the nation’s shale-oil explorers resume drilling. The number of rigs in operation has more than doubled since May, according to Baker Hughes Inc., while government data shows U.S. production has recovered to its highest in more than a year.
OPEC raised estimates for growth in non-OPEC supply for a third month, increasing its forecast by 176,000 barrels a day. The group sees rival production expanding by 580,000 barrels a day, more than four times the growth rate projected in January and almost half the amount its members pledged to cut.
The group predicted further new supply among its competitors in coming years, with the biggest-ever increases from multi-billion dollar “mega projects” in Brazil, Canada and the Gulf of Mexico that will reach completion from 2017 to 2019.
The report also showed most OPEC members moving closer to the production targets they set on Nov. 30 in an effort to eliminate excess supply.
Compliance among the 11 members bound by the deal rose to 104 percent in March, as the United Arab Emirates moved closer to its ceiling, Venezuela delivered its full promised reduction and Saudi Arabia continued to cut by even more than required for a third month. Output from all 13 members declined by 152,700 barrels a day in March to 31.928 million barrels a day.
Ministers will meet in Vienna on May 25 to decide whether the accord should be extended beyond its expiry in June.