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Data across sources last month show rising Opec compliance to crude output cuts, strategists at Goldman Sachs said on Tuesday, reiterating their view that the oil market rebalancing “is still progressing” with evidence of “strong demand over the past few weeks”.
The comments came after a report from Opec showed that Saudi Arabia lifted output last month raising concerns about the kingdom’s commitment to an oil output deal it struck along with non-members like Russia late last year.
Data submitted by the Saudi government to Opec showed an increase in production to above 10m barrels per day. But so-called secondary source data, that uses assessments from consultants and analysts, showed production slid in February from the previous month to below 9.8m bpd.
Saudi also said the extra production was intended for its domestic storage and not the international market, which according to Damien Courvalin at Goldman, “would help reverse the 57m barrel decline in crude stocks in the Kingdom since October 2015 and be consistent with higher refinery runs locally in February”.
Moreover, the kingdom’s energy ministry issued a statement asserting its commitment to “stabilising the global oil market” on Tuesday.
That helped stanch the bleeding in crude prices. Brent crude, which had declined as much as 2.1 per cent to $50.25 a barrel, pared back its losses to trade 0.7 per cent lower at $50.97 a barrel, at pixel time. Meanwhile, West Texas Intermediate, the US crude benchmark, which had fallen as much as 2.7 per cent to $47.09 a barrel, had pared back its gains to trade 1.3 per cent lower.
However, Mr Courvalin also reiterated his view that “it is not in OPEC’s interest to extend its cuts beyond six months as its goal is to normalise inventories, not support prices”.