Oil prices jumped as much as two percent on Friday on word that OPEC producers have achieved around 92 percent of the output cuts they had pledged.
Eleven members of the Organisation of the Petroleum Exporting Countries had agreed to pump less from January to raise prices. Previous such deals had much lower compliance – initially around 60 percent for one in 2009.
Another 11 non-OPEC producers signed on to the deal, including Russia and Kazakhstan, and are estimated to have delivered about half of the cuts they pledged.
The International Energy Agency, which advises industrial nations on energy policy, was the main sources of the information. It said: “Some producers, notably Saudi Arabia, (are) appearing to cut by more than required.”
The IEA also raised its global oil demand growth expectations for this year to 1.4 million barrels per day (bpd), up 100,000 bpd from its previous estimate.
Higher price helps US shale producers
While the deal has boosted oil prices, that makes it more profitable for US shale oil producers to increase production. Capital Economics analysts said in a note: “We think US production is likely to rebound.”
US energy companies have been adding oil rigs and redeploying cash and workers, cautiously confident the energy sector has turned a corner, with crude prices holding above $50 a barrel since early December.
Qatar’s energy minister recently said but the global oil market can accommodate higher shale oil production.
Mohammed al-Sada told Reuters: “With that continuous demand increase I think all available oils are going to be accommodated.”
“With the current price some fields can be developed profitably though the majority of fields today will not be satisfied with this current price and will not be able to justify further development in high-cost oil fields, especially deep-water and unconventional fields,” he added.