Aug. 24 (UPI) -- A joint committee monitoring an OPEC-led effort to balance the markets said Thursday that "all options" are on the table to ensure a positive outcome.
Members of a joint committee monitoring a deal implemented in January to prop up a market facing negative pressure from supply-side strains said the effort is working. In a statement, the committee said it "took note of the recent market development and expressed confidence that the oil market is moving in the right direction towards the objectives of the declaration of cooperation."
OPEC and non-member states like Russia agreed to sideline almost 2 million barrels per day in production in an effort to erase the surplus for the five-year average of global crude oil inventories. Total global inventories remained skewed toward the supply side, however, and the inventory level in the United States, the world's leading economy, is still about 20 percent above the five-year average, though that's down 40 percent in early February.
"U.S. inventories may have been declining, but they are only inching down elsewhere in the rest of the world," Vandana Hari, an industry analyst and founder of Vanda Insights, told UPI in response to emailed questions. "OPEC is in a tight spot and none of its committees have it easy."
On the demand side, the monitoring committee said that while collective output was curtailed, global oil demand for 2017 was stronger than expected and on pace to rise even further next year. Nevertheless, crude oil prices have been stuck in a narrow range and are more or less unchanged from this date last year. The overall OPEC-led effort, meanwhile, faces internal threats from Libya and Nigeria, two strong producers exempt from the agreement because of national security issues.
"All options, including the possible extension of the declaration of cooperation beyond first quarter 2018, are left open to ensure that all efforts are made to rebalance the market for the benefit of all," the monitoring committee said.
Oil markets were pressured last year by strong U.S. oil production and a previous OPEC policy to defend its market share with robust output. The Texas Alliance of Energy Producers said that, with shale producers growing accustomed to life at $50 per barrel, the "production curtailments did not achieve the desired price outcome."
Meanwhile, the monitoring committee said compliance was 94 percent, lower than in previous months. Ole Hanson, the head of commodity strategy at Saxo Bank, told UPI the deal was working, but rising production from Libya, Nigeria and the United States, "together with reduced compliance, has reduced the positive impact of solid demand growth."
The monitoring committee added it was keen on inviting Libya and Nigeria to the next round of meetings.