Opec faces 'long haul' to deplete swollen oil stocks, IEA says

[LONDON] Opec won't clear the global oil glut any time soon since any increase in price continues to bolster rival production from US shale, according to the International Energy Agency.

"If they wish to achieve the reduction of oil stocks down to the five-year average, they're going to have to dig in for the long haul," Neil Atkinson, head of the IEA's oil markets and industry division, said Tuesday in a Bloomberg television interview. "Rebalancing is a stubborn process."

The Organization of Petroleum Exporting Countries and allies including Russia are curtailing oil output in an effort to deplete bloated inventories and drive up the price of crude. The curbs, which have been extended through next March, have been partly offset by rising supply from Libya and Nigeria, exempt from the cuts, while price gains have spurred drilling from producers in the US.

"The resilience of the US shale producers and the flexibility, the ability to bring on more oil at relatively low cost and short notice, means any signs of life - as far as the price is concerned - encourages more US shale," Mr Atkinson said. "The price is self-capped."

Benchmark Brent crude is trading around US$50.70 a barrel in London, half its value of three years ago.  The IEA said in a report last week that Opec's cutbacks are having some success as global inventories declined at a rate of about 500,000 barrels a day in the second quarter.

While that narrowed the surplus, stockpiles were still 219 million barrels above the five-year average at the end of June, the agency said.

BLOOMBERG