OPEC and a number of non-OPEC countries, including Russian Federation, cut a deal in November 2016 aimed at decreasing global oil production by 2 percent. Most analysts are betting that oil prices will remain well-supported and so the market is not expecting steep or early declines.
"The [production] cut in 2019 should be seen positively in the market".
That sets 2018 up to be very good for oil prices.
On 30 November previous year it was announced that the oil price cut agreement would be extended until the end of 2018 in an effort to support oil prices.
It kept its oil demand growth estimate for 2018 unchanged at 1.3 million bpd, down from 1.6 million bpd in 2017, mainly due to the impact of higher oil prices and changing patterns of oil use in China.
In a monthly update, the rich world's energy watchdog said USA oil output was set for "explosive" growth in 2018, together with "substantial" gains in Brazil and Canada that would more than offset steep declines in Venezuela and Mexico.
"As we approach the re-balancing by the end of 2018, we need to extend the framework but not necessarily in the production levels", Al-Falih said.
As a result of lower Venezuelan production, the IEA said OPEC's crude output in December fell to 32.23 million bpd, boosting the group's compliance with a deal to curb output to 129 percent. "We're uncertain that the pace of inventory drawdown will continue in coming months". OECD commercial stocks declined for the fourth consecutive month in November, by 17.9 million barrels, with a large fall in middle distillates, said IEA. "The market is still sensitive to geopolitical developments". The government ministers had a meeting in Oman earlier, discussing the introduced quotas and the situation on the oil markets.
Oil prices have risen from around $45 a barrel in June to over $70 a barrel this month in part because of the group's agreement to reduce the world's oil production by about 1.8 million barrels a day, or almost 2% of global output. OPEC's message to the world, he said, should be "this is something that is here to stay". Thus, we figure that with the reduction in the United States inventories and OPEC supply, the global oil markets will have enough elbow room to accommodate the growing United States oil supply and will take some time to go into another downturn.
The normal seasonal move is an increase - which happens about two-thirds of the time.
He said a January 21, 2018 committee meeting of some OPEC and non-OPEC ministers in Oman would focus on reviewing adherence to the cuts, adding that compliance in December was at 125% (from 106% in 2017), reflecting non-OPEC countries' staying true to their commitments on production cuts.
Helima Croft, head of commodity strategy at RBC Capital says "the outlook for crude is constructive", and she has less fear about the growth of U.S. production mainly because, "there's a very healthy demand picture" ahead for the year, especially if OPEC keeps the agreement in place for the full year.