Oil in Global Economy Series: OPEC May deal compliance review

The market wasn't caught by surprise by the IEA data, as on Tuesday, the American Petroleum Institute reported that USA crude inventories rose 2.8 million barrels last week, while gasoline supplies increased by 1.8 million barrels.

But adherence to the cuts is under scrutiny and the producer group said this week its output rose by 336,000 bpd in May to 32.14 million bpd.

"It's not threatening any production, so the markets have yawned", he said.

The flow surge should show up in us imports data sometime in late July.

"The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market", it said.

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In its first forecast for 2018, the International Energy Agency said Wednesday it expected countries outside the cartel to increase production by about 1.5 million barrels per day, outstripping the growth in global demand.

It's not like the Saudis are enjoying significantly higher prices, with Brent crude ending on Tuesday at $48.72 a barrel, perilously close to the $46.38 close the day before the November 30 deal between OPEC and its allies.

A report from the IEA indicated that Iraq, along with other OPEC members, was being less than diligent in cutting oil production and abiding by the OPEC deal.

The price of oil has fallen 12 per cent since May 25, when Opec and its partners agreed to extend their supply cut, as inventories around the world have been slow to drain.

It seems that oil inventories are particularly unpredictable as of late, with last week, the API and EIA reporting remarkably disparate figures in the amount of crude oil inventory movement-a 7.9-million-barrel discrepancy between the two that fanned the flames of an already shaky market.

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And Brent has dropped back below US$50 since the OPEC meeting and was trading at US$48.17 on Wednesday.

Saudi Arabia reported to OPEC that it reduced output further by about 66,000 bpd in May to 9.88 million bpd. "It's a huge resource, it's changed everything", said Gary N Ross, global head of oil at energy analysts Pira, of United States shale.

OPEC, and some non-OPEC producers led by Russian Federation, agreed last month to extend supply curbs for nine months through to the end of March 2018.

The renewal comes at a time when the global supply overhang has been depressing the oil prices and revenues for over the past three years.

"By some accounts this increase is a troubling threat to Opec compliance, but we note that it was driven by 352,000 bpd of additional supply from Libya and Nigeria", wrote Tim Evans, energy analyst at Citigroup.

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