There seems to be relative stability on global oil prices throughout this week as members of OPEC and even allies regained critical control over the oil market due to their production limits were able to nutralise supply glut that caused prices to plunge recently.
However, leading oil and gas industry data giant, he IEA warned Thursday that further restraint is needed to sustain the balance in demand and supply.
In its regular monthly report, the International Energy Agency said that global oil stocks are likely to dip in 2017 and should mostly be in balance next year assuming unchanged OPEC production.
According to IEA’s outlook, “A lot has been achieved towards stabilising the market, but to build on this success in 2018 will require continued discipline”.
Analysts had observed that the global oil markets have been roiled in recent years as the OPEC oil cartel abandoned in 2014 its traditional role of supporting prices in an effort to retain market share against upstart US oil shale producers.
Oil prices plunged from over $100 per barrel to under $30 last year, squeezing oil firms and wreaking havoc in the economies of oil-producing countries.
Towards the end of 2016, OPEC and a number of other producers led by Russia agreed to throttle their output. The pact, which has now been extended through March 2018, has helped oil prices to climb back above $50 per barrel.
The Paris-based IEA noted that “The next few weeks ahead of the producers’ meeting in Vienna on 30 November will be crucial in shaping their decision on output”.
“But there is little doubt that leading producers have re-committed to do whatever it takes to underpin the market and to support the long process of re-balancing,” it added.
IEA, which advises the leading energy-consuming nations, noted the recent visit by King Salman to Moscow, the first by a Saudi monarch, where a number of investment deals were agreed and hints were dropped about further production limits.
“For Saudi Arabia and Russia, who worked together to forge the OPEC/non-OPEC agreement, there is a strong economic incentive to support oil prices by limiting supply,” said the IEA.
“For 2017 to date, OPEC as a whole and Russia have earned more while pumping less,” it added.
Saudi Arabia has the added interest of wanting to keep crude prices high ahead of a public listing of five percent of shares in its giant Saudi Aramco oil firm, which is set to take place next year.
The latest forecasts for global oil demand and other producers show that the ball is in the court of members of the production pact to deepen surveillance.