Despite the skeptics, OPEC is doing exactly what it said it would do – which was to dramatically rein in oil production. Global oil output plunged during January as OPEC and non-OPEC producers curbed supply to accelerate a market rebalancing, according to the International Energy Agency (IEA). Oil supplies fell by around 1.5 million barrels per day during the month of January, including a cut of 1 million bpd by OPEC, leading to record initial compliance of 90%. Interestingly, some producers, notably Saudi Arabia, are appearing to cut by more than required. “This first cut is certainly one of the deepest in the history of OPEC output cut initiatives," the IEA said. The IEA estimates that if the January level of compliance is maintained, the output reductions combined with strong demand growth, should help ease the record supply overhang over the next six months by around 600,000 bpd. OPEC’s production free-for-all over recent years has had a big negative impact on many US shale operators. It didn’t wipe them out entirely, but it’s left many mortally wounded.
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