Oil markets are tightening and prices will stabilise this year if Opec and other producers stick to promised production cuts, the International Energy Agency said yesterday.
Resurgent US shale production would partially offset Opec cuts and prices would not return to a sufficiently high level to allow another bonanza for high-cost producers, it added.
In its monthly update, the agency raised its estimate for demand growth last year, driven by stronger demand for liquefied petroleum gas and diesel in Europe. It said global oil supplies fell in December before the planned output limits that came into effect at the start of the year. Production curbs agreed in November by Opec members and other major producers including Russia were entering their “probation period” and it was “far too soon” to gauge the level of compliance, the agency said.
If production was cut as agreed it would result in global oil stocks being drawn over the first half of the year to a point where “the market will have tightened and prices stabilised”.
However, in the latest sign that the cuts may benefit US shale producers as much as Opec, the agency said it had upgraded forecasts for non-Opec production in 2017 “as higher prices stimulate increased investment in the US”.
Advertisement
In London Brent Crude was 0.4 per cen higher at $54.12 a barrel.