“It is now halftime for the six-month oil production cuts agreed by OPEC and eleven non-OPEC countries. So far, the game has gone fairly well for producers,” the Paris-based organization said in the report published Thursday.
OPEC slashed output by around 1.2 million barrels per day (b/d) from January 1 for six months in order to remove a supply glut. Eleven other non-OPEC countries, including Russia, agreed to limit supply by half as much.
“For OPEC countries, compliance has been impressive from the start while non-OPEC participants are gradually increasing their compliance rate, although in their case it is harder for analysts to verify the data,” the IEA added.
The IEA projected the oil market would likely tighten throughout the year as non-OPEC oil production, not just in the U.S., is forecast to increase once again.
“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,” Atkinson and his team said in the report.
“This would provide further support to prices, which in turn would offer further encouragement to the U.S. shale oil sector and other producers,” the IEA added.
Oil prices fell by around 10 percent in March as a result of unplanned outages and rising political tension in the Middle East, though the IEA stressed prices had since stabilized.
Brent crude traded at around $55.83 a barrel on Thursday shortly after the European open, down 0.04 percent, while U.S. crude was around $53.05 a barrel, down 0.11 percent.