Opec and Russia have defied the sceptics and their production cuts have eliminated half the oil-inventory surplus, meaning the rebalancing of the market is accelerating, said Secretary-General Mohammad Barkindo. “A balanced oil market is now fully in sight,” Barkindo said at the Oil & Money conference in London on Thursday. “Stability is steadily returning and there is far more light at the end of the dark tunnel we have been travelling down for the past three years.”
The upbeat speech from the Organization of Petroleum Exporting Countries’ top official underscores the recent shift in market sentiment. The world’s two crude benchmarks are back in bull territory as thorough implementation of historic supply cuts by 24 Opec and non-Opec producers drained fuel stockpiles for several months. While the resurgence in US shale still clouds the outlook for prices next year, oil exporters are feeling “a warmer glow,” Barkindo said.
The secretary-general chided oil executives gathered in London for doubting a year ago whether Opec would actually implement production cuts, or was capable of bringing several non-members including Russia into the agreement. “I am happy to stand here today and say that those sceptics were mistaken,” Barkindo said. The oil inventory surplus in industrialised nations compared with the five-year average has fallen below 160mn barrels, less than half the level at the start of the year, he said. Stronger demand means that decline has accelerated since May, he said.
Opec’s internal forecasts show stockpiles will finally move back in line with the five-year average in the third quarter of next year. The group’s supply-cuts deal expires at the end of March, but there’s “general agreement” for an extension, Amir Zamaninia, deputy minister for trade and international affairs at Iran’s Oil Ministry, said this week. The 24 nations will meet on November 30 in Vienna to discuss prolonging the cuts.