Global stockpiles for crude oil are starting to see declines, a sure sign that mutual production costs put in place this year are starting to balance out the market. This is according to Mohammad Barkindo, who is the Secretary-General of OPEC. As a matter of fact, Barkindo said he remains “cautiously optimistic that the market is already rebalancing” and that “We have started seeing stock levels coming down.”
Indeed, the six-country membership of the Organization of Petroleum Exporting Countries—as well as Oman—now support the extension of various production cuts to some point beyond June on the heels of Saudi Arabia and Kuwait both saying that oil stockpiles need to fall back down to their five-year average. For reference sake, there is an estimated overhang of approximately 285 million barrels in oil storage that continues to drag prices down, and causing both OPEC and non-OPEC members alike to slow their output.
All of this comes just after the commodity having its biggest weekly increase in the year, so far, with OPEC speculating an extension to curb output. It also followed a report from the US government which showed that American refineries boosted crude use by its biggest margin in roughly three years as fuel supplies dropped. As a matter of fact, one report from Morgan Stanley listed that “less visible” crude stockpiles—including this throughout Asia—have fallen as much as 72 barrels this year.
Perhaps most interestingly, Iran—which had at first sought exemption from the OPEC output curb—was found to be in 98 percent compliance, in March, after revised production data was released on Saturday, according to Iraq’s Oil Minister, Jabbar Al-Luaibi. Similarly, Iraq State Oil Marketing Organization (SOMO) director general, Falah Al-amri, said that the his country’s production in March had reached 4.46 million barrels per day.
With that in mind, then, Iraq still plans to increase oil output capacity to 5 million barrels per day, though that is a goal for the end of the year. At the same time, Baghdad has assured the OPEC group that it will continue to be in full compliance with the pact over the oil supply cut efforts.
Finally, US State Department official Alan Eyre said, at a Baghdad energy conference, on Sunday, that these higher prices—a result of the OPEC cuts—will readily encourage more US shale production. He admits “Today’s oil price is the new normal.”