The OPEC + agreement to reduce oil production contributes to the rebalancing of the world market, indicates an analysis by the United States Energy Information Administration (EIA).
On April 15, members of the Organization of the Petroleum Exporting Countries (OPEC) and 10 non-OPEC partner countries, collectively known as OPEC+, agreed to reduce crude production in response to rapidly increasing global oil inventories in the first quarter of 2020.
At the time, efforts to contain the spread of the coronavirus resulted in a sharp drop in demand for petroleum-derived liquids and lower crude oil prices.
As of May 2020, the OPEC + agreement called for a decrease in crude production by an initial 9.7 million barrels per day (b / d) that is gradually reduced until April 2022, the end of the current agreement period.
Monthly EIA data shows that OPEC’s total crude production decreased by 6.0 million b/d from April to May, which was the largest decrease in monthly production since 1993.
Compared to total petroleum liquids production in January 2020, partner country production fell by an estimated 5.9 million b/d in May, 7.9 million b/d in June, 7.1 million b/d in July and 5.6 million b/d in August.
The OPEC members, Iran, Libya and Venezuela, were exempted from the production cut agreement due to economic sanctions or internal political instability.
The EIA estimates that the OPEC + deal, along with declining production elsewhere, including the United States, reduced global supply below the level of global demand for the first time since mid-2019.
A supply lower than demand has led to significant liquid fuel inventory cuts globally since June.
The EIA expects inventories to continue to decline in the second half of 2020 and through most of 2021, resulting in a relatively balanced market by the end of next year, based on the September 2020 short-term energy outlook from the EIA.