Global oil demand improves but slowdown still forecast for 2017: IEA

Saudi Arabia's Energy Minister Khalid al Falih talks to journalists before a meeting of OPEC oil ministers in Vienna Austria

The production decrease was partially offset by increases in Libya and Nigeria, which are not participating in the agreement.

The agreement took effect on Jan.1 and is due to last for six months, although some OPEC members have already signaled a willingness to consider an extension.

Oil prices rose almost 2 per cent on Friday after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January.

Qatar's energy minister, Mohammed al-Sada, has again attempted to dismiss concerns over the impact of growing USA shale production on oil markets and crude prices, Kallanish Energy understands.

Oil supplies fell by around 1.5mon barrels per day last month, including by 1mn bpd for Opec, leading to record initial compliance of 90% with a six-month output-cut deal reached in December by big producers to boost prices.

S&P Global Platts, which monitors monthly OPEC production, released its latest survey earlier this week and found members achieved 91 percent of their required cuts for the month of January, or 1.14 million bpd. Resilient oil demand is aiding the effort, growing more than expected past year and poised to do so again in 2017. "This first cut is certainly one of the deepest in the history of Opec output cut initiatives", the IEA, which advises industrial nations on energy policy, said. At the end of 2016, OECD oil stocks were still 286 million barrels above the five-year average and they are likely to remain significantly above average at the end of June, the IEA said.

Production in Iraq, which tried to secure an exemption from the cuts, declined by 120,000 barrels a day to 4.51 million. Some analysts even maintain that now 60% of the remaining world oil production is precisely in the United States shale oil sector, whose companies should gain a competitive advantage over the next five years. Qatar's energy minister recently said but the global oil market can accommodate higher shale oil production.

"The key question for the oil market is how long OPEC can sustain this deal", Spencer Welch, a director at IHS Energy, said by e-mail.

However, despite the successful compliance rate of OPEC, the road to oil price recovery continues to be a challenging one, particularly after the U.S. President Donald Trump's pledge to ease drilling restrictions and maximisation of oil production.

Brent crude, the worldwide benchmark of oil prices, approached the highest level in over a year after the IEA's report, gaining 1.9% to $56.73 per barrel. The figures could be revised before they are published, sources said.

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