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The implementation of the OPEC deal for reduction of oil yields reached its lowest levels in six months after several countries rose oil production. In this way, rebalancing of the market is delayed, according to the International Energy Agency (IEA). OPEC’s deal plunged to 78% last month from 95% in May, after the larger than allowed production of Algeria, Ecuador, Gabon, Iraq, the UAE and Venezuela has overshadowed the strong performance from Saudi Arabia, Kuwait, Qatar and Angola.

“Every month, something seems to happen, which may increase doubts about the pace of the rebalancing process. This month there are two things: a dramatic recovery of oil production from Libya and Nigeria, and a lower rate of implementation by OPEC of its own mining agreement”, said IEA.

OPEC and several non-cartel countries, including Russia, agreed to reduce production to about 1.8 million barrels per day by the end of March 2018 to ease the global over-production caused by US production.

Libya and Nigeria were excluded from the deal because of the years of turbulence that cut their yields sharply. However, the both countries have managed to increase their total production by over 700,000 barrels per day in recent months.

“For the OPEC countries, which have agreed to lower 1.2 million barrels per day, see how nearly two-thirds of their mined extraction is replaced by another, is probably very disappointing, especially since their pact has been up to date with historic standards”, says IEA.

The deal stabilized oil at about 45-50 USD per barrel, but prices have been under new pressure in recent weeks due to higher US yields and the lack of strong evidence that global reserves have fallen to their record levels of more than 3 billion barrels. The IEA, which advises the industrialized countries on their energy policy, said strong demand growth in the second half of 2017 and 2018 should nevertheless accelerate the rebalancing of the market. The forecasts of the organization show that OPEC crude oil will grow steadily by the end of 2017 and will reach 33.6 million barrels per day in the fourth quarter, which represents 1 million barrels per day more than OPEC mining in June.

“If there is a strong performance of the OPEC deal, it will require a serious drop in reserves even if Libya and Nigeria continue to recover”, said the IEA.

The reserves in industrialized countries in May were 266 million barrels above 5-year average, compared to 300 million barrels in April. Preliminary data also show a modest decline in reserves in June. The agency also said that while non-OPEC producers such as the US, Canada and Brazil are returning steadily towards growth, the recent fall in oil prices may force some US producers to rethink their prospects.

