Production cuts by the Organisation of Petroleum Exporting Countries (Opec) and non-Opec producers in January achieved a record compliance rate of 90 per cent, the International Energy Agency today said.
As the news came out that oil supplies fell by around 1.5m barrels per day (bpd) last month, benchmark Brent crude prices surged up 1.15 per cent at $56.27 per barrel while West Texas Intermediate were trading up one per cent at $53.53.
Opec has called on oil producers to curb production to help prop up low oil prices and cut the global crude oversupply.
"Some producers, notably Saudi Arabia, (are) appearing to cut by more than required. This first cut is certainly one of the deepest in the history of Opec output cut initiatives," the IEA, which advises industrial nations on energy policy, said.
If this level of compliance is maintained, the difference between global demand and supply will help ease record stock levels in the next six months by around 600,000 bpd.
In the fourth quarter of 2016, stocks in member countries of the Organisation for Economic Cooperation and Development fell by nearly 800,000 bpd, the IEA said. That's the largest drop in three years.
However, at the end of the year stockpiles were still 286m barrels above the five-year average level, and they will remain significantly above average levels by the end of the first half of 2017.
Global demand was revised upwards for the third month in a row, and for 2016 it is seen at 1.6m bpd, the IEA said. Colder weather in Europe and growth in China, India and non-OECD countries gave demand a higher than expected boost.
In 2017, the IEA expects demand to grow by 1.4m bpd, an increase of 0.1m bpd from its last report.