Oil demand is expected to increase significantly in the second half of the year compared to first half with expected growth reaching 2 million barrels per day, which should sustain inventory draws, according to OPEC's statement on Monday.
The Joint OPEC and non-OPEC Ministerial Monitoring Committee (JMMC) met in St. Petersburg to review the June 2017 report as well as the first six months of the Declaration of Cooperation, as submitted by the Joint OPEC and non-OPEC Technical Committee (JTC).
The Committee reviewed the JTC report and noted that the oil market is making steady and significant progress towards rebalancing.
In the statement, it underlined that market volatility was lower in recent weeks and investment flows have visibly started to improve in the industry.
'This assertion is based on the report of the JTC for the month of June 2017, which reviewed market developments and the results of the first six months of progress made according to OPEC’s 171st Ministerial Conference Decision and the respective voluntary adjustments in line with the Declaration of Cooperation,' according to the statement.
It is also stressed that continued strengthening of the global recovery is underway, with stability in the oil market remaining a key determinant.
According to the JTC report, there are several positive indicators going forward.
Participating OPEC and non-OPEC producing countries achieved a conformity level of 98 percent in June 2017, the report showed. Between January and June 2017, the participating producing countries adjusted their production downwards by an estimated volume of 351 million barrels.
-Nigeria's participation encouraged
The JMMC further welcomed the flexibility of Nigeria, an OPEC member that was exempt from production cuts, which despite its commitment to recover its pre-crisis production level, voluntarily agreed to implement adjustments as soon as its recovery reaches a sustainable production volume of 1.8 miilion barrels per day (mb/d).
- Further action required for stabilization
The JMMC also recommended as an option the extension of the Declaration of Cooperation beyond the first quarter of next year should further action be required for the stabilization of the market.
Meanwhile, Russian Energy Minister Alexander Novak said that after the oil cut agreement, the global oil surplus was reduced by 350 million barrels in total.
He also said that Russia suggests extending the oil cut agreement beyond the March 2018 deadline.
During the same meeting, Khalid Al-Falih, minister of energy, industry and mineral resources of Saudi Arabia said the kingdom would limit oil exports to 6.6 million barrels per day.
He added that the country has already cut 1 million barrels of oil production per day.
The 5th meeting of the JMMC is scheduled to take place in September 2017, or earlier if deemed necessary.
By Gulsen Cagatay