Oil Jumps After IEA Reports Record OPEC Compliance With Production Cut Deal

Tyler Durden's picture

Oil jumped this morning, with Brent rising 1%, trading above $56 after the International Energy Agency said OPEC had achieved record initial compliance of 90% with planned production cuts - it is unclear how much of this was self-reported and questionable -  while demand grew faster than expected.

In the first month of OPEC’s supply cut agreement, key member Saudi Arabia reduced production by 116%, or even more than it had committed, despite Venezuela's struggles to reduce output (it had achieved only 18% of planned cuts) while higher demand is aiding the group’s bid to re-balance world markets, the IEA said.

The following Bloomberg chart shows alleged deal compliance by nation...

... and the detailed breakdown is shown below:

The IEA, which advises industrial nations on energy policy, said that if current compliance levels are maintained, the global oil stocks overhang that has weighed on prices should fall by about 600,000 barrels per day (bpd) in the next six months. The IEA also estimated that 11 producers including Russia, Kazakhstan pumped 269k b/d less crude in January versus October-November levels, citing preliminary data.

The IEA also increased its 2016 estimates for world oil demand growth for a third month, and boosted its outlook for 2017, anticipating an increase of 1.4 million barrels a day this year. World oil inventories will fall by 600,000 barrels a day during the first half of the year if OPEC sticks to its agreement, the IEA said.

Oil has fluctuated above $50 a barrel since a deal to trim output between OPEC and 11 other nations took effect on Jan. 1. U.S. producers are taking advantage of higher prices by increasing drilling activity and boosting daily output to the highest level since April, a dynamic the IEA said is capping prices in the mid-$50s.

“There is a demand element to this price rise as well as OPEC compliance,” says Michael Hewson, market analyst at CMC Markets. “We’re still short of the highs of the month”

“The key question for the oil market is how long OPEC can sustain this deal,” Spencer Welch, a director at IHS Energy, said by e-mail. “Historic analysis of similar production limits suggests that 100 percent compliance is unlikely.”

While the oil market welcomed the data, which may or may not be accurate as verification remains problematic and recent surges in inventory suggest quite the opposite of what the IEA reports, increasingly more attention has recently fallen on US crude production, especially in light of a recent surge in Permian drilling rigs... 

... which threatens to disrupt the much desired supply/demand equilibrium.

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VinceFostersGhost's picture



IEA Reports Record OPEC Compliance




Just talked to some home boys from ND........they're slinging crude out of there like it's freakin water.

Arnold's picture

It is no sin to lie to infidels.

Government needs you to pay taxes's picture

I hear the cork popping . . . on about 5000 US tight sand/shale wells that were shut in when oil prices were low.   No US patronage for the sandniggers.  Keep NRG jobs here in the USA.

skbull44's picture

Devil is in the details: "...it is unclear how much of this was self-reported and questionable..."

VinceFostersGhost's picture



unclear how much of this was self-reported


I would say.......mostly.

Sonny Brakes's picture

Don't believe everything you read.

toocrazy2yoo's picture

All liars. Mouthpiece for OPEC telling us everyone is doing their cuts in dutiful fashion? Priceless.

adr's picture

And we're still adding to record inventory levels. 

gdpetti's picture

Isn't that why the govt wants to 'release' from our reserve? To manipulate the market? Isn't this what most markets are these days?.. one collective western BS show?

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) gdpetti Feb 10, 2017 11:14 AM

strategic reserves are not enough to do more than create fake news and waste tax dollars as bribes to whoever their buyers are.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Feb 10, 2017 11:13 AM

exceptionally low demand and record storage of refined products, but the "market" still finds a way to stay high.

Sapere aude's picture

Shale wells were not shut in, they had to keep producing to stave off creditors.

This idea that shale is the saviour of the U.S. is complete rubbish as is the idea of a glut of oil.

Not one U.S. major oil company made a single cent out of oil production from shales.

They were pumping in $1.50 for every $1 they pump out.

The fictious U.S. oil production figures rising is another example of market manipulation, just as using inventory from increased oil imports!

Have you ever heard anything as crazy, then using it to keep the increasing imports of oil cheap because you need more of it!

It really all is a nonsense.

The shale companies have only staved off bankruptcy by tapping stockholders for more money, or by selling off assets, or other little tricks, such as keeping off the real costs of plugging and abandoning shale oilwells that deplete very rapidly.

Even in their accounts, they show they are not hanging on because of profits from oil, let alone from shale, they are clinging on by borrowings, tapping holders for more funds, selling assets, and generally keeping CAPEX off the books, along with the other costs.

So the idea that previously shut in wells are waiting to be brought on line is tosh.

They can't even keep up with decline rates, which is the killer blow on shales, and forces companies to keep tapping for more and more funds, or producing more and more stock/shares diluting everyone else, for a hiding to nothing.




Sapere aude's picture

Elco. Only the EIA says its low demand, the IEA says increased demand. Remember the EIA was specifically set up copying the independent IEA, even using the same characters in different order and its a wholly government run organisation.

Look at the EIA figures and you will see they even admit they are plucking them out of the air, on guesstimates that need constant revision.

Look up what they held as reserves for the Bakken or the other shales, and then look up how much they eventually downgraded them.

The Eagle Ford, the Bakken and a lot of other shales are already finished, the Permian is the latest ponzi, but its all from ever increasing debt, when the sale of oil against the cost shows losses as it did at $80.

Pad drilling was instrumental in increasing the declines, as it used up all the sweet spots, but where the Red Queen Syndrome kicks in on shales, requiring ever more money to drill ever more wells, just to try to keep a production peak, but where those new costs are often treated as costs for increased production, when they are not increasing production, as that is an impossibility, they are struggling to replace legacy wells.

Then look at the drop in CAPEX from the previous link, that illustrates a massive downturn in production, so the idea its increasing is a work of fiction designed to keep oil cheaper, but it no longer cuts it with the rest of the world, as no one believes the U.s. figures any more, either on gold, silver, oil or any other paper manipulated commodity.

Recently they showed 60% shorting of oil, and this is not by oil companies hedging their output, because at $50 or even $60 hedging it does not even cover their costs. It was shorted by design to keep the price artificially low, just like silver, just like gold, and most of the other markets that allow paper derivatives.