Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the U.S. could at least keep oil prices steady around current levels in the second half of 2017.
“The problem with new investments, however, remains. Bahrain’s oil minister, speaking at the same event as the IEA official, said that although prices have improved lately, they are not high enough to motivate sufficient investment in new production,” according to OilPrice.com. “Bahrain’s top oil man is not the only one warning about a possible supply crunch, but given these officials’ vested interest in the effect of supply crunches on prices, their comments are better taken with a pinch of salt.”
Between 2014 and 2016, global oil companies reduced spending by a whopping 40%, efforts that included significant layoffs and withdrawals from projects seen as too expensive or unlikely to bear near-term profits.
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