OPEC, allies hold the cards in oil market

Paris: OPEC and its allies have regained some control over the oil market as their production limits have eroded the supply glut that caused prices to plunge, but the IEA warned Thursday further restraint is needed if this balance is to be maintained.

In its regular monthly report, the International Energy Agency said that global oil stocks are likely to dip in 2017 and should mostly be in balance next year assuming unchanged OPEC production.

"A lot has been achieved towards stabilising the market, but to build on this success in 2018 will require continued discipline," said the IEA. Global oil markets have been roiled in recent years as the OPEC oil cartel abandoned in 2014 its traditional role of supporting prices in an effort to retain market share against upstart US oil shale producers.

Oil prices plunged from over $100 per barrel to under $30 last year, squeezing oil firms and wreaking havoc in the economies of oil producing countries.

Late last year OPEC and a number of other producers led by Russia agreed to throttle their output. The pact, which has now been extended through March 2018, has helped oil prices to climb back above $50 per barrel. "The next few weeks ahead of the producers´ meeting in Vienna on 30 November will be crucial in shaping their decision on output," said the Paris-based IEA.

"But there is little doubt that leading producers have re-committed to do whatever it takes to underpin the market and to support the long process of re-balancing," it added.

The IEA, which advises the leading energy-consuming nations, noted the recent visit by King Salman to Moscow, the first by a Saudi monarch, where a number of investment deals were agreed and hints were dropped about further production limits. "For Saudi Arabia and Russia, who worked together to forge the OPEC/non-OPEC agreement, there is a strong economic incentive to support oil prices by limiting supply," said the IEA.