OPEC has embarked on its promised crude production cuts with an unprecedented degree of adherence, keeping the benchmark Brent trading in a tight range around $55 per barrel and driving speculative bets on prices to record highs at the end of January. While the oil producers organization still faces an uphill battle in removing the global supply overhang that has weighed on oil markets since mid-2014, it might have just embarked on a brand-new supply management policy -- albeit one that it will have to make up as it goes along.
Crude production by OPEC's 13 member countries was down by around 800,000 to 1 million barrels per day in January compared with October 2016, the baseline used for the bloc's Nov. 30 output cut agreement, according to independent surveys. These surveys variously found a remarkably high 80-90% overall compliance by the 11 members bound by production ceilings as part of the deal to reduce supply by about 1.2 million barrels daily. Nigeria and Libya, which are exempted from the cut as their output has been constrained below normal levels by militancy and civil strife, respectively, both managed to increase production somewhat in January.
