Saudi Arabia continued to lead OPEC's efforts to cut production, helping the organization get closer to a goal set out in a historic accord past year. In January, while OPEC had claimed a 90% compliance rate, Reuters survey had pegged the compliance rate at 82%.
In the short term, OPEC will downplay the renewed growth in shale output and emphasize its own compliance with announced production cuts.
Reports about ambitious plans for expanding Iraq's refining capacity contributed to the pessimism, but Oil Minister Jabar al-Luaibi reassured the market that Iraq will stick to its undertaking in the production cut agreement, adding that it plans to tender five new refineries on an investment basis, and expand existing ones, a lot of them damaged during the war with IS. The non-OPEC members who had supported the cuts have achieved 60 percent compliance at the moment. The rise in US crude oil production can pressure crude oil (IEZ) (USO) (FENY) prices.
Kuwait pledged to cut production by 131,000 bpd from a baseline of 2.838 million bpd.
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Crude oil prices continued to fall Thursday, stung by a stronger dollar and surging United States inventories. Nevertheless, the eighth successive week of crude inventory build puts U.S. stocks at a new historic high of 520.2 million barrels and suggests a longer wait for the market to see proof of the almost 1.8 mil b/d of collective output cuts pledged by OPEC and 11 non-OPEC countries, now in their third month of implementation. The Organization of Petroleum Exporting Countries will decide at a meeting in May whether to prolong the accord past June 30. On the contrary, USA crude stocks have risen 39 million barrels this year, to 518 million, since OPEC started cutting production in January.
The resurgence of shale production poses a direct challenge to OPEC's attempt to rebalance the global oil market while protecting its market share.
The EIA report also showed that gasoline inventories declined by 546,000 barrels.
As a resume, the OPEC deal has succeeded in already taking roughly 1 million barrels per day off of the market, but the supply/demand balance is still not as tight as OPEC members had hoped it would be at this point.