An extension to international production cuts would encourage the rival US shale sector, as it could fill the shortfall, the International Energy Agency (IEA) said today.
The agency said the decision by Opec and 11 non-Opec nations to reduce output for an initial six months starting January 1 had “gone fairly well” and that compliance had been “impressive”.
The IEA also said the market was already “very close to balance”, based on analysis of the first three months of the cuts.
Growth in demand is estimated to have gone down by 200,000 barrels per day (bpd) to 1.1million bpd in the first quarter of 2017.
The IEA said growth was weaker-than-expected in a number of countries, including Russia, India, several Middle Eastern countries, Korea and the US during the period.
Stocks in the 35 OECD countries rose by 400,000 bpd, contributing to a “marginal” increase globally.
Production will have grown year-on-year by May, the agency said.
For the full year, the IEA predicts growth of 485,000 bpd, compared to a decline of 790,000 bpd in 2016.
The IEA said: “Even at this mid-way point, we can consider what comes next.
“It is of course Opec’s business to decide on its output levels, but a consequence of (hypothetically) extending their output cuts beyond the six-month mark would be bigger implied stock draws.
“This would provide further support to prices, which in turn would offer further encouragement to the US shale oil sector and other producers.
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