Those stockpiles will fall by about 700,000 barrels a day in the second quarter if OPEC keeps April’s production level, the IEA forecast in its latest monthly report. The energy adviser said the drawdown will be even greater if OPEC maintains its policy during the next six months, when refineries will consume more crude oil to meet peak demand for fuel in the summer.
But OPEC still may not hit its target this year.
“Even if this turns out to be the case, stocks at the end of 2017 might not have fallen to the five-year average, suggesting that much work remains to be done in the second half of 2017 to drain them further.”
Some market watchers now believe exporters must agree to deeper cuts, but a number of analysts say that is not likely.
To be sure, EIA believes supply and demand have basically balanced following a protracted period of global oversupply that sent oil prices to 12-year lows below $30 a barrel last year. Exporters’ supply cuts have boosted prices back above $50 a barrel for much of the last 5½ months.
But the rebound has emboldened producers beyond the two dozen nations that have curtailed output, particularly U.S. shale drillers that rely on expensive production methods to unlock oil and gas from rock formations.