When OPEC and Russia convene in May to evaluate the influence of their oil reductions they will meet an unexpected result: supplies are even greater than when the production cuts were initiated.
“Stocks have begun to decrease, but when ministers assemble in Vienna next month, established countries will not have gone through the large over supply produced by a swell in the Organization of Petroleum Exporting Countries production just prior to the implementation of the production cuts,” said Sigmund Wallace at China based INTO Investment Partners
OPEC has been defeated by its own strategy by supporting the efforts to decrease production whilst permitting member countries to continue to increase sales until the agreement was implemented. The cuts, which have now fully come into effect, have been counter balanced by the American shale producers’ efforts.
The agreement towards the end of 2016 between Russia, 10 other oil producing countries and Organization of Petroleum Exporting Countries was meant to increase prices by getting rid of a large stock surplus. This measure has been largely unsuccessful as the surplus persists even months later.
At the end of 2016 sale able oil stores in the 35-country Organization for Economic Cooperation and Development equaled almost 3 billion barrels. That figure increased to 3.06 billion at the beginning of this year, thanks largely to a delayed boost in OPEC shipments prior to the full implementation of the production cuts.
Stocks in the Organization for Economic Cooperation and Development, who is responsible for approximately 50% of the world’s total supply, decreased only marginally in February of 2017 and continued to be high above the 5 year mean.
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