Oil gains as USA stockpiles fall while IEA sees OPEC cutting

From an average of 2.83 million bpd in 2015 output soared to 3.53 million bpd in the following year

OPEC's plan to kill USA hydraulic fracturing with low oil prices only made companies "leaner and more efficient", according to the International Energy Agency (IEA).

Russian Federation has pumped an average of 11.1 million barrels a day in January, a reduction of 108,000 barrels a day from official government figures for both November and December, initial Energy Ministry data compiled by Bloomberg show.

An oil glut has depressed prices for more than two years.

According to Birol, as crude oil prices recover, shale producers could expend their output by as much as 500,000 barrels per day.

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The IEA said its still "far too soon" to know the level of compliance the production deals will achieve. Last week, the EIA reported an increase of 4.1 million barrels in commercial crude oil inventories, exceeding analyst expectations of a 930,000-barrel build. Moreover, Nigeria - which, like Libya, is exempt from the OPEC deal - is intent on restoring production.

A group of non-OPEC members, including Russian Federation, have also agreed to trim their overall production by 558,000 bpd.

Russian Federation has also confirmed it has started cutting output, by 100,000 bpd initially, to rise to 300,000 by the end of the six-month period that the agreement will be in force.

OPEC Secretary General Mohammad Sanusi Barkindo told the Associated Press earlier this month this month that there has been a "high level of compliance" with the production plans.

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Oil prices shot up to more than $100 a barrel in mid-2014 before a long slide sent them crashing below $30 in early 2016.

"The prospect of higher product prices - assuming that the cost of crude oil rises in 2017 - plus the possibility of a stronger U.S. dollar are factors behind our reduced demand growth outlook for this year".

The IEA's monthly report on Thursday showed OPEC production dropped to 33.09 million barrels a day in December from 34.2 million the previous month.

The dollar index - one of the main factors influencing dynamics in crude pricing was among the supportive signs for the market. The IEA revised up its estimate of global demand growth for 2016 by 110,000 bpd to 1.5 mb/d.

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Still, that increase is small compared with the 1.8 million barrels a day in production that OPEC and non-OPEC countries have pledged to reduce. The IEA predicts that non-OPEC countries on the whole will add 380,000 bpd of net capacity this year, and crucially, that figure includes the promised 558,000 bpd reductions that 11 countries promised in conjunction with the OPEC cuts.

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