IEA: Oil stocks up in Q1 despite OPEC’s cut, likely to fall in Q2

According to Bloomberg, the International Energy Agency said that although the OPEC members perfectly implemented the agreed output cut, global oil inventories increased “marginally” in the first quarter of 2017 due to the rise in production before the deal started to be implemented. Oil inventories in the OECD countries were up by 38.5 million barrels/day in Q1 to 3 billion barrels/day, the data showed.

However, they are expected to decline in the second quarter if the group extends the deal in the second half of the year. The estimates are that the stockpiles will decrease by 1.2 million barrels/day if the group maintains the current production levels and by 1.6 million barrels/day if the deal is extended.

So far, OPEC achieved 99% compliance with the deal through March, with Saudi Arabia, Kuwait, Qatar and Angola cutting oil output more than required and the group’s output was down by 365,000 barrels/day.

As can be seen in the ChemOrbis graph below, since the first signals of a possible deal on oil cut among OPEC members in mid-November 2016, Nymex and Brent futures, which were then trading at about $45/barrel, started to follow an increasing trend, with Nymex recently trading above $52/barrel while Brent has been hovering around $55/barrel.



The reports revealed that OPEC’s biggest producer, Saudi Arabia, is said to be in favor of extending the deal when the group members meet as this decision is expected to reduce oil stocks and push the prices further up in the near future.