OREANDA-NEWS. OPEC’s decision last November to keep its production ceiling in place despite plunging oil prices raised a lot of eyebrows, with many questioning the rationale of the move given that some of the group’s members were hurting from the low prices.

In January, OPEC Secretary General Abdalla el-Badri reaffirmed the group’s decision, saying it made more sense for higher-cost production – meaning oil like US light tight oil – to leave the market ahead of low-cost output like most of OPEC’s.

It now looks like this scenario may be about to play out for real.

On February 10, the International Energy Agency cut its forecast for non-OPEC supply growth in 2015, taking account of companies slashing spending in reaction to the much lower oil price, and revised down its expectations for US production this year.

It said reductions in capital expenditures had cut projected 2015 non-OPEC supply growth to 800,000 b/d for 2015 compared with a forecast of 950,000 b/d in the previous month’s report.

The IEA had already reduced its forecast for non-OPEC supply growth this year by 350,000 b/d in its January report.

It is in the United States in particular where the IEA sees lower production because of the spending cuts — it now sees total US output in 2015 at 12.4 million b/d, a reduction of 200,000 b/d on its previous estimate.

Most of the cuts are expected in the second half of the year, it said.

And who stands to gain from the slowing in US production growth at this particular point in the year? Well, OPEC.

The IEA raised its demand forecast for OPEC crude in the second half of 2015 by 400,000 b/d to 30.2 million b/d, back above the group’s production ceiling of 30 million b/d.

But things have a habit of changing quickly in today’s volatile oil world, and the IEA said the lag of the latest market response to the fall in price might be shorter than usual due to the short lead time and treadmill-like spending needs of US light tight oil.

Usually, the full physical impact of demand and supply responses to lower prices can take months, if not years, to be felt.

“Non-OPEC supply has become on average more price responsive than during previous price plunges,” the IEA said.

It said the swiftness of light tight oil supply cuts will help put a floor under prices, just as their reversal when prices rebound in earnest might put a ceiling over them.

But, it said, supply expectations for the first half of 2015 have yet to be significantly reduced and the latest data for December 2014 show no further reduction in the estimate of supply in the final quarter of last year.

The IEA also said the recent spending cuts by oil companies would take time to translate into any meaningful reduction in supply.

“Despite expectations of tightening balances by end-2015, downward market pressures may not have run their course just yet,” the IEA said.

And the latest stock data is one such bearish signal.

Stocks are nearing record highs and inventories are likely to build further, the IEA said.

“Barring any unforeseen disruption, OECD stocks may by mid-2015 come close to revisiting the all-time high of 2.83 billion barrels reached in August 1998,” it said.

Industry oil stocks inched down by just a tiny fraction of their usual draw in December, sending the surplus versus average levels to 65 million barrels, the widest since October 2010, from 16 million barrels a month earlier.

So while the price has rebounded somewhat, and the IEA seeing less US production later in the year, there is still plenty of oil around, including OPEC’s.