As OPEC and its partners last month agreed on prolonging production cuts, the group’s output was climbing the most since November as members exempt from the deal restored lost supply.
Production jumped by 336,100 barrels a day in May as Libya and Nigeria revived output halted by attacks and political crises, a report from the Organization of Petroleum Exporting Countries showed on Tuesday. The two nations were excluded from curbs that were extended on May 25 because of earlier disruptions to their oil industries.
Still, OPEC predicts that surplus oil inventories will continue to decline in the second half of the year as their cuts take effect and demand picks up. The group reduced forecasts for supplies from partners such as Russia, Kazakhstan and Sudan as they implement their pledges to restrain output.
“The re-balancing of the market is underway,” according to the report by OPEC’s Vienna-based secretariat. “The decline seen in the overhang” in developed-nation stockpiles “is expected to continue in the second half, supported by production adjustments by OPEC and participating non-OPEC producers.”
Oil prices have slipped almost 14 percent this year as initial hopes that OPEC would succeed in clearing a three-year surplus gave way to concern that the output cuts aren’t deep enough, and that U.S. shale drillers are filling in any shortfall.
While OPEC’s latest forecasts indicate it expects its 10 partners will continue to cooperate, they don’t suggest those countries will fully deliver on their commitments.
OPEC lowered forecasts for Russian production in the second half of the year by 200,000 barrels a day, or about two-thirds of the amount the country’s government has promised to cut.
The overall outlook for non-OPEC supply in the second half was reduced by 200,000 barrels a day. The producers assisting OPEC had pledged a total reduction of about 558,000 barrels a day.
Still, the report suggested that the producers’ efforts are having some success. The surplus in oil inventories in developed nations relative to their five-year average — OPEC’s main measure of the overhang — is down to 251 million barrels from 339 million a the end of last year.