Global oil supply curbs implemented this month have the potential to put a floor under crude prices and set the stage for market gains later in the year, the International Energy Agency said today.
The reductions will take OPEC market share to its lowest level since the mid-1980s, the IEA said, when the Organisation of the Petroleum Exporting Countries last embarked on a series of cuts which ended with the 1986 price crash.
Oil prices slumped by a third following the attacks on the United States, which darkened an already gloomy outlook for the world economy, stabilising near $20 a barrel for Brent since November.
Implementation of the production cut commitments has the potential to put a floor under crude prices and to set the stage for later price gains, the IEA said in its monthly oil market report.
Faced with slowing demand, OPEC decided to cut output by 1.5 million barrels per day (bpd) from January 1st after it obtained assurances from five rival exporters of a 460,000 bpd reduction.
The IEA predicted that global oil inventories would fall faster than previously expected in the first quarter, while a seasonal build in the following period would be smaller after the cuts.
Under the new quota restrictions, Saudi Arabia will lose its status to the United States as the world's largest producer of liquid hydrocarbons, the Paris-based agency said.
But Saudi will keep the top spot in conventional crude oil production, but slip to second when all liquid hydrocarbons, including natural gas liquid and condensate, are counted.
After the latest cut, the global top-ten of oil producers will contain just three OPEC members, the IEA said.
The 11 member cartel would end up with less than 32 per cent of global production, the agency said, although it would keep more than half of world exports.