Sara Sjolin / MarketWatch
The oil market has finally swung into a supply deficit, and demand is expected to outstrip output even more in the second half of the year if OPEC agrees to extend its production cuts, according to a top energy watchdog.
Speaking at the Platts Crude Oil Summit in London on Wednesday, Neil Atkinson, head of oil analysis at the International Energy Agency, said the current agreement by more than 20 major oil producers has succeeded in making a dent in the global supply glut that has kept prices under pressure in recent years.
“It is starting to become clear that if the objective of the OPEC cuts was to flip the market from surplus into deficit that is now slowly beginning to happen,” he said.
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Myra P. Saefong / MarketWatch
Oil traders largely expect the Organization of the Petroleum Exporting Countries to agree later this month to extend a production-cut agreement into the second half of 2017, but at least one analyst is very skeptical.
After all, the “current strategy is not working,” Nitesh Shah, commodity strategist at ETF Securities, wrote in a blog post Thursday.
He said that the most “credible options” for OPEC’s next move would be to either agree on a deeper cut or let the deal collapse. “The latter options seems the most likely outcome.”
OPEC members and some major non-OPEC oil producers agreed to reduce their collective output by 1.8 million barrels a day under a six-month agreement that began on Jan. 1.That pact is set to expire in June and OPEC is expected to make a decision on whether to extend it when members meet in Vienna on May 25.