By Alex Lawler
LONDON (Reuters) – OPEC cut oil output in March by more than pledged under a supply reduction deal and said oil inventories had fallen in February, suggesting that its effort to clear a supply glut that has weighed on world oil prices is succeeding.
But the Organization of the Petroleum Exporting Countries also raised its forecast for supplies from non-member countries in 2017 as higher oil prices encourage U.S. shale drillers to pump more, reducing demand for OPEC’s oil this year.
OPEC is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1 for six months, the first reduction in eight years, to get rid of a supply glut. Russia and 10 other non-OPEC producers agreed to cut half as much.
Oil prices pared gains on Wednesday after the report was released to trade at around $56 a barrel <LCOc1>. Prices are up from about $42 a barrel a year ago. [O/R]
OPEC was upbeat on the outlook for the market in its monthly report.
“Despite some downside risks, general expectations for demand growth for oil products in the coming months remain bullish,” the report said.
“The return of refineries from seasonal maintenance and healthy demand, together with the high conformity observed in OPEC and non-OPEC production adjustments, should enhance market stability and reduce the volatility seen in recent weeks.”
Compliance in March by the 11 OPEC members with output targets under the supply cut deal averaged 104 percent, according to a Reuters calculation based on production figures OPEC published. This is in line with earlier figures seen by Reuters on Tuesday.
OPEC is considering whether to extend the supply cut deal beyond June and most members, including Saudi Arabia and Kuwait, are leaning towards this if all producers, including non-OPEC also agree, OPEC sources told Reuters last month.
(Reporting by Alex Lawler; editing by Jason Neely and Jane Merriman)