The oversupplied oil market will be rebalanced earlier than expected if major crude producers implement a deal to cap output when they meet next month, the International Energy Agency chief said Tuesday. Under current conditions, the IEA expects global output to exceed demand until the second half of 2017, Fatih Birol told journalists on the sidelines of an energy conference in Singapore.
"But we know that the producers are thinking of intervening in the markets. The Opec and non-Opec producers, if they intervene in the markets, this rebalance can be earlier than the second half of 2017," he said. In a surprise move, Opec (Organisation of the Petroleum Exporting Countries) members led by oil kingpin Saudi Arabia last month agreed on a deal to trim production, sending crude prices surging.
The Opec deal which aims to stabilise prices is the first to limit production since 2008 but details will only be determined during the group's meeting on November 30 in Vienna. Iran, Saudi Arabia's bitter geopolitical rival, was exempted from the cuts as it is still ramping up production depleted by years of crippling Western economic sanctions lifted only in January.
Production has outpaced demand over the past two years, with the resulting supply glut hammering prices from highs of more than $100 a barrel in June 2014 to near 13-year lows below $30 in February this year. Prices are currently hovering above $50 a barrel ahead of next month's Opec meeting. But some analysts say Iraq's recent insistence that it should also be exempt from the cuts could derail implementation of the deal.