LONDON, Feb. 8 -- The Organization of Petroleum Exporting Countries (OPEC) and Russia are both in breach of their production cutting agreement made at the end of last year, according to figures issued Friday by the International Energy Agency (IEA).
The IEA monthly oil report shows that OPEC cut production by less than half the 1.5 million b/d it agreed on and that Russia, instead of cutting output by 150,000 b/d actually increased production.
Since the start of the year, Norway's output has dropped by the 150,000 b/d promised and Mexico's production has declined by the 100,000 b/d that it pledged, although the IEA has reported that both countries increased production during December, probably due to meeting contracted deliveries before the new output agreement came into effect.
Production from Oman, which promised a cut of 40,000 b/d, has not been reduced from normal monthly levels and Angola, which offered to cut 22,500 b/d increased output instead by 70,000 b/d as the TotalFinaElf SA-operated Girassol offshore field was inaugurated, increasing the country's output.
The IEA estimates that the 10 OPEC members who participate in quotas reduced production by 640,000 b/d in January. They produced 23 million b/d last month, 1.3 million bbl more than their new target, according to the report.
Supply from Iraq, an OPEC member that doesn't have a quota because of United Nations sanctions, rose to 2.17 million b/d, the IEA said.
The IEA figures show that world oil supply decreased by just 510,000 b/d in January to 76.3 million b/d while OPEC and non-OPEC producers had agreed to cut output by 2 million b/d. The IEA now predicts that global demand will average 76.4 million b/d in the first quarter of this year, down 200,000 b/d from last month's estimate.
Traders on the London International Petroleum Exchange had already assumed that the OPEC quota would be breached this month and that it will take a longer period for the cuts to be achieved. Traders suggest that prices are now being affected by US demand rather than output levels. Brent crude oil is now trading at $19.46, up 25¢, on the week. Oil stocks, which normally fall in the fourth quarter of the year as Europe and the US use heating oil, fell by 320,000 b/d last quarter, less than the average decline of the last 5 years.
Stocks in the 26 Organization for Economic Cooperation and Development countries ended December at 2.62 billion bbl, 3.7% higher than a year ago, the IEA said.
