The International Energy Agency (IEA) said on Friday that OPEC’s production cut plan has achieved a 90 percent compliance rate but warned that oil market outlooks remain uncertain.
The IEA found that OPEC production fell to 32.1 million barrels per day in January.
OPEC members agreed late last year to cut the group’s overall production down to about 32.5 million bpd.
Libya and Nigeria are exempt from the cuts and Iran is allowed to boost production slightly under the deal.
The IEA found that OPEC members achieved a record initial compliance rate of 90 percent.
While seaborne export data for January has not been finalized, the IEA said that “OPEC nevertheless appears to have made a solid start to what is a six-month process.”
“This first cut is certainly one of the deepest in the history of OPEC output cut initiatives,” the IEA said.
Eleven non-OPEC members, including in Russia, agreed in December to cut their total production by 558,000 barrels per day.
Both the OPEC and non-OPEC deals were effective at the start of the month and will be in place for an initial period of six months.
The IEA said preliminary data that Russia cut output by 100,000 bpd in January, still shy of its 300,000 bpd reduction target.
Despite the OPEC and non-OPEC cuts, the IEA found that non-OPEC participating in the deal are expected to significantly increase production.
The IEA expects combined output from Brazil, Canada and the Untied States to climb by 750,000 bpd in 2017.
Non-OPEC net production, including the targeted cuts, is anticipated to grow by about 400,000 bpd, the IEA added.
The IEA said that recent growth in U.S. light tight oil drilling activity growth “suggest that production will recover.”
The IEA has forecast U.S. tight oil production to add 175,000 bpd this year, with production in December expected to post a 520,000 bpd gain over the year-ago period.
The agency revised its global growth forecast up for the third month in a row and now sees global demand hitting 1.6 million bpd.
The revision was driven by stronger than expected growth in Europe as well as long-term growth in China, India and non-OECD countries.
The IEA said that, assuming normal weather conditions, it expects demand to grow by 1.4 million bpd in 2017, a 100,000 bpd gain from the agency’s previous report.
If OPEC producers continue to comply with the production deal, the IEA expects to see a 600,000 bpd global crude inventory drawdown.
“It should be remembered, though, that this stock draw is from a great height,” the IEA said.
The agency said that, although OECD crud stocks fell for five straight months last year, inventories ended the year at 286 million barrels.
That level placed OECD crude inventories “above the five-year average level.”
The agency warned that, even if OPEC meets its production cut target, OECD crude inventories will “remain significantly above average levels” at the end of the first half of 2017.
The IEA noted that the persistence of high crude inventories and investor caution in assessing output levels and production cuts have continued to hold Brent crude prices below the $60 per barrel.
“The oil market is very much in a wait-and-see mode,” the IEA said.