Opec says oil glut nearly gone, makes supply pledge amid Iran worries

Crude Oil Production

The deal between the Organization of the Petroleum Exporting Countries and non-Opec producers led by Russian Federation to cut supplies and erase a global glut has helped oil prices reach US$78 a barrel, their highest level since 2014.

Both oil futures contracts hit their highest since November 2014 last week at $78 and $71.89 a barrel respectively as markets anticipated a sharp fall in Iranian crude supply once USA sanctions bite later this year.

The country produced 3.813 million barrels per day of crude oil in March, the report read.

Given the above issue, global price of oil hits a record low which was unprecedented in the recent years.

On the MCX, oil prices declined 1 percent to close at Rs.4757 per barrel.

Oil and gas analyst for Hydrocarbon Capital Malcolm Graham-Wood predicts that about 1m barrels of oil will go off the market following the decision, reducing the supply of oil which was tight from before.

In a television interview, U.A.E. Energy Minister Suhail Al Mazrouei said "don't worry about supply", because OPEC has an adequate "buffer" of potential production to offset barrels lost through renewed sanctions.

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"In 2012 the reduction in Iranian crude production and exports was around 1 million bpd", Wittner said.

But OPEC forecast headwinds to future growth, such as the slow place of oil industry investment and an expected dip next year in investment in USA shale, also known as tight oil.

Oil prices are moderately falling, as of Monday morning, May 14, amid intensifying drilling activities of USA and resistance of Europe and Asia to US sanctions on Iran.

The higher crude prices that have followed have prompted growth in rival supply and a flood of USA shale output.

According to Baker Hughes, the number of oil rigs in US was increased by 10 to 844 units last week.

Opec signalled it was ready to step in should "geopolitical developments" impact supply.

"Strong conformity by Opec and participating non-Opec nations in terms of production adjustments through the Declaration of Cooperation also continue to support the oil market".

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