A decision by the Organization of Petroleum Exporting Countries last year to offset supply-side strains with coordinated production cuts helped set a floor under crude oil prices of around $50 per barrel. Strong compliance with the agreement, now in its second year, helped drive the price of oil above $70 per barrel in January, a multi-year high.
Speaking at an investment forum in Saudi Arabia, OPEC Secretary General Mohammad Barkindo said the overall market has settled on firmer ground, after several years of contraction.
“The market has now rediscovered its optimism and confidence,” he said. “Others have even remarked that it has finally found its compass.”
In its latest monthly market report, the International Energy Agency said that supply-side strains are easing considerably. At this point last year, the crude oil inventory held by the world’s leading industrial economies sat at 264 million barrels above the five-year average. Now that’s closer to 50 million barrels of overhang.