Too early to tell if Opec+ cuts will succeed: IEA

London

THE International Energy Agency (IEA) said that it's too early to tell whether oil-supply cuts announced by the Organization of Petroleum Exporting Countries (Opec) and its allies last week will succeed in balancing global markets.

Even if Opec and its partners reduce production as promised, there could be some surplus in 2019, according to a monthly report from the agency. The IEA slashed its forecast for new supplies outside Opec next year because of a lower outlook for Russia - which is cooperating with Opec - and Canada, which is separately suppressing output to deplete brimming inventories.

"Time will tell how effective the new production agreement will be in rebalancing the oil market," said the Paris-based IEA. "Stocks have been building with the potential for significant oversupply next year."

Oil prices remain stuck in a bear market, trading near US$60 a barrel in London, despite the agreement by the 24-nation coalition known as Opec+ to curb production by 1.2 million barrels a day.

Traders are speculating that the cutbacks aren't deep enough, and that booming US shale production will unleash a new surplus.

At just over 33 million barrels a day in November, Opec is pumping well in excess of the 31.6 million a day the IEA estimates is required on average next year. Even if the coalition delivers its pledged cutback in full, it might not be enough to check a glut, though the IEA noted the potential for continued declines in supply from Iran and Venezuela.

Opec's own monthly report, published on Wednesday, presented similar findings. While the cuts might be sufficient to keep supply and demand in balance in the first half of next year, the coalition may need to almost double the reduction in the fourth quarter, data from the report indicated.

The IEA assumes that Russia will participate in the cutbacks as agreed, and lowered projections for non-Opec supply accordingly.

The non-Opec outlook was also reduced as the Canadian province of Alberta dials back output to clear a backlog that's clogging up local infrastructure.

Non-Opec oil production is now forecast to increase by 1.5 million barrels a day in 2019, down 22 per cent from the 1.9 million a day estimated in last month's report. Forecasts for global oil demand were kept unchanged. BLOOMBERG