Oil analysts have cut their 2017 crude price forecasts for a sixth straight month in July, citing concerns over compliance with an OPEC-led deal to limit production that could dampen the market’s attempt to rebalance.
The Organization of the Petroleum Exporting Countries and partners including Russia have agreed to reduce output by about 1.8 million barrels per day (bpd) until March 2018.
“OPEC’s compliance is expected to remain under pressure over the coming months as scepticism grows over the pace of market rebalancing, despite actions taken by the cartel and some non-OPEC countries,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.
Adherence to the deal was high in the first half of the year, but the International Energy Agency’s latest report showed compliance fell to 78 percent in June from 95 percent in May, as several members pumped much more oil than agreed upon.
Saudi Arabia, Angola and Kuwait have shouldered the largest cuts.
OPEC member Ecuador has opted out of the deal and said it plans to gradually raise output. Analysts agree the impact on overall supply is likely to be small, but the move could hurt market sentiment.
“The longer prices remain low, the greater the risk is that some OPEC countries will no longer comply with the production cuts as strictly as they have been doing so far,” Commerzbank analyst Carsten Fritsch said.
Following Ecuador’s announcement, Saudi Arabia pledged to cut exports in August, when domestic Saudi energy consumption is close to its highest. Read More….