OPEC Reached A New Record High For Its Members’ Compliance Rate For The Months January And February, Surprising Markets As A Result. Meanwhile, Saudi Arabia Expressed Wish To See Oil Prices Surge To At Least $60 Per Barrel Amid Increasing US Shale Inventories.
Oil prices steadied on Wednesday after Tuesday reports a record compliance rate from OPEC member for the month of February, reaching 94% cuts to their daily oil production. The Organization of the Petroleum Exporting Countries reported data from survey exhibiting promising compliance of the production cut deal which began in January.
Since the end of February, OPEC has cut its oil output, posting second consecutive month of strong compliance rate from the countries part of the deal.
At present, WTI Crude April deliveries were at $53.880845 GMT per barrel, down by $0.15 or 0.28%, while benchmark Brent crude at ICE Futures traded at $56.38 a barrel, down $0.13, or 0.23% from the previous session. Prior to the oil prices’ slight downtrend, the energy product opened higher on the first day of March; with Brent crude $56.10, $0.17 up from the previous session and crude oil 0.2% higher to $54.16.
In January, OPEC reached a total of 90% compliance rate from its members as well as other non-members part of the deal, led by Russia. The strong compliance rate was partly attributed by Saudi Arabia strong compliance with the deal. In total, OPEC was able to trim 1.098 barrels per day, with the target of 1.164 bpd.
The International Energy Agency even expressed optimistic remarks regarding the good performance displayed by OPEC, calling it a record level. Previously, OPEC members are known for not complying with agreed output cuts, taking the markets by surprise with this year’s strong compliance rate. Even countries like Iraq and United Arab Emirates, which are known to slack off on output cuts, managed to keep up with the target levels.
Saudi Arabia aims for $60 a barrel
Meanwhile, OPEC’s largest oil supplier, Saudi Arabia, expressed on Tuesday their target to at least lead oil prices to climb around the $60 level per barrel by the end of 2017.
According to reports, Saudi Arabia mentioned its hopes for oil prices to rise to at least $60 within the year. “If compliance is high by OPEC and non-OPEC, then I think prices will reach $60,” mentioned an OPEC delegate.
This remark was the driver behind Saudi Arabia’s strong compliance and beyond quota output cuts to its production since January. Just in January, the nation cut a total of 744,000 barrels per day to its production, more than the initial agreed upon 486,000 bpd.
Saudi Arabia opts for oil prices to rise to $60 per barrel in order to benefit from boosted exporters’ income as well as additional industry investment. Saudi Arabia said that the previously low oil prices have taken a toll on state budgets, putting more pressure on bigger companies.
However, it does not wish for prices to go higher than the level $60 per barrel since this could possibly encourage US oil producers to further increase production levels.
Meanwhile, OPEC itself did not specify any definite oil price target for its output cuts, but only seeks to re-balance oil market and global oil inventories.
US Shale Output Threat
Despite OPEC’s efforts to bring oil prices higher, the cartel’s efforts are recently often challenged with USA’s continuously rising oil inventories, counteracting OPEC and its member’s target for higher oil prices in the market.
America’s oversupply continues to challenge OPEC’s goal to reach prices around level $60 per barrel. Since OPEC output cuts talk began in November, oil prices already surged 14% from last year’s rate of around $35 per barrel, but was still only trading at level $56 per barrel at present, which is still below some of OPEC members’ target price surge. According to a research data, the number of operating rigs in the US at present increased by 5 to 602. This has been the highest rig count for the country since October 2015.