At the end of November, the Organization of Petroleum Exporting Countries agreed to cut output by 1.2 million bpd from January 1, initially for a period of six months.
In this regard, it is also worth recalling that the agreement between OPEC and non-OPEC countries would enable the United States shale oil producers to stabilize production or even to increase it.
"We do not forecast what OPEC production will be during the six months covered by the output deal; but if the January level of compliance is maintained, the difference between global demand and supply implies a stock draw of 0.6 mb/d".
OPEC has already agreed to reduce output by 1.2 million barrels per day. As a result of the high compliance OPEC and non-OPEC cut, OECD storage should be back to the five-year average by June this year.
A new report suggests OPEC members have almost met their targets to dramatically curb oil supplies, as Canadian and US oil producers continue to raise production and benefit from higher crude prices.
Oil supply is expected to grow year-on-year in the first half of 2017 in large non-OPEC producers such as Canada, Brazil and Kazakhstan, BNP Paribas said in a research note this week.
Oil has fluctuated above $50 a barrel since a deal to trim output between OPEC and 11 other nations took effect on January 1. "There was also data showing that while Chinese imports were down last month, they remain very strong, adding to the rebalancing picture". China imported 8.05 million barrels a day in January, according to Bloomberg calculations based on data Friday from the General Administration of Customs.
However, the solution to the oil market's imbalance still rests heavily on U.S. shale producers. 17 oil rigs were added in the U.S.in the week to February 3, bringing the total up to 583, the most since October 2015.
Coupled with the IEA's 100,000-barrel per day upward revision to demand increase expectations to 1.4 million barrels, the Paris-based watchdog's data should have a positive impact on the oil markets, both domestic and global.
As part of the coordinated OPEC-non-OPEC supply cut, Russian Federation has pledged to gradually reduce production by 300,000 bpd between January and June.
However, despite the successful compliance rate of OPEC, the road to oil price recovery continues to be a challenging one, particularly after the U.S. President Donald Trump's pledge to ease drilling restrictions and maximisation of oil production.
It is also expected, that around 6 percent of Chinese refining capacity would shut down at some point during the first half of the year, equivalent to around 900,000 bpd of capacity.