OPEC and other exporters such as Russian Federation have agreed to keep production nearly 1.8 million barrels per day (bpd) below the levels pumped at the end of previous year and not to increase output until the end of the first quarter of 2018.
It seems that oil inventories are particularly unpredictable as of late, with last week, the API and EIA reporting remarkably disparate figures in the amount of crude oil inventory movement-a 7.9-million-barrel discrepancy between the two that fanned the flames of an already shaky market.
Growing oil supply is set to outpace demand next year, unravelling the Organisation of the Petroleum Exporting Countries' (Opec) efforts to cut supply in order to support prices, according to a report.
The measures helped stabilise oil prices at the beginning of the year, with the Global benchmark Brent crude sticking above $50 per barrel. The nation's shale-oil explorers, who first triggered the glut OPEC is trying to contain, have emerged more efficient from the oil market's three-year slump.
Other factors contributing to the oil surplus include increased US crude production, thanks largely to the advances in shale oil drilling methods that include hydraulic fracturing, known as fracking.
"The rebalancing of the market is under way, but at a slower pace, given the changes in fundamentals since December, especially the shift in United States supply from an expected contraction to positive growth", OPEC added.
Between 2012 and the middle of 2014, the organisation's members complacently enjoyed high prices but ceded market share to the USA shale sector and other non-OPEC producers including deepwater projects. China also said crude oil production fell 3.7% in May from a year earlier to 16.26 million metric tons, or 3.83 million barrels per day (bpd), the lowest daily level on record.
Producers inflated oil stockpiles at the end of last year by ramping up exports just before their agreement started, and demand growth has disappointed so far this year.
According to IEA's June market report, total OECD oil stocks in April grew by more than the seasonal norm, and have risen so far this year by 350,000 bpd.
BP analysts said that production outside the Middle East fell by 1.3 Mb/d, with the largest declines in the U.S. (-400,000 b/d), China (-310,000 b/d) and Nigeria (-280,000 b/d).
Crude prices will need to remain relatively low until more of the hedges have expired, private equity funding has slowed and drilling moderates to a more sustainable pace.
Pulling the market for crude oil back into balance is taking longer than expected even as demand growth accelerates, OPEC said in a monthly report.