The oil market is "making steady and significant progress towards rebalancing." This was the outcome of the fourth meeting of the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) held in St. Petersburg to review the progress of production cuts, which may even be extended until the first quarter of 2018. By reviewing market developments and the results of the first six months of progress made according to OPEC’s 171st Ministerial Conference Decision, on this occasion the ministers noted that "the continued strengthening of the global recovery is underway, with stability in the oil market remaining a key determinant – as reported in the OPEC statement - The market volatility has been lower in recent weeks and investment flows have visibly started to improve in the industry." To put this into figures, oil demand is expected to increase significantly in the second half of 2017 compared to the first half of the year, with growth reaching a level of 2 million barrels per day.
The outcome for the first half of 2017
The fact that all the countries that signed the agreement are keen to participate is proven by the conformity level of 98% reached in June. Between January and June 2017, the participating producing countries adjusted their production downwards by an estimated volume of 351 million barrels. Moreover, the overhang of OECD commercial oil stocks over the 5-year average level has fallen by 90 million barrels for the period from January to June 2017 and now stands at 250 million barrels in total. Notwithstanding these results, the Monitoring Committee "noted that despite the high level of conformity at the aggregate level, there is still room for improvement by some participating producing countries, and demanded that all participating producing countries promptly reach full conformity." In addition, the Monitoring Committee addressed the cases of Libya and Nigeria, which so far have been exempted from the cuts, also urging countries to cut down production. The JMMC further welcomed the flexibility of Nigeria in this regard, which "despite its commitment to recover its pre-crisis production level, voluntarily agreed to implement similar OPEC production adjustments as soon as its recovery reaches a sustainable production volume of 1.8 million barrels per day."
If further steps should be needed to stabilize the market, the cuts may be extended beyond the first quarter of 2018. Russian Energy Minister Alexander Novak announced this at the meeting hosted by the Russian Federation. Novak also stated that "in the second half of 2017, the price of oil will stand at about 50-60 dollars per barrel." The 5th meeting of the JMMC is scheduled to take place in September 2017, or earlier if deemed necessary.