The Organization of Petroleum Exporting Countries, including leading member Saudi Arabia, is showing "reasonably good compliance" with the cartel's recent moves to curtail oil output, consultant PFC Energy said Thursday.
The U.S.-based firm said OPEC's moves could improve the market for crude, which has plunged by more than $80 a barrel from highs above $145 last summer.
OPEC in September pledged to adhere to a quota of 28.8 million barrels a day, effectively agreeing to cut output that exceeded that amount for months.
In an emergency meeting in late October, the group agreed to cut output by a further 1.5 million barrels a day, to 27.3 million barrels a day, among the 11 members subject to the quota.
Several OPEC nations have confirmed they have begun to reduce production, but Saudi Arabia has yet to show its hand. The Saudis unilaterally raised output earlier this year as oil prices soared above $100 a barrel.
PFC said the kingdom supports the reductions. In a memo, the consultant said it "sees Saudi Arabia not only as agreeing to these cuts, but also as a principal player" in arranging both the latest 1.5-million-barrel-a-day cut and the Oct. 24 emergency meeting at which it was decided, rescheduled with short notice from a planned meeting in November.
Still, it's likely the bulk of these cuts will come in December allocations due to be finalized in mid-November, PFC said.
Between August and October, Saudi Arabia has cut 300,000 barrels a day in output to 9.35 million barrels a day, or 407,000 barrels a day over its September quota, the consultancy said.
Saudi Arabia in October agreed to cut back 466,000 barrels a day from its quota starting Nov. 1, which would take its output to 8.477 million barrels a day. PFC sees the kingdom's output falling to 8.6 million barrels a day by January 2009.
Cuts already announced by OPEC members Algeria, Kuwait, Qatar and the United Arab Emirates are credible, PFC said, but the firm still has doubts about quota compliance from Nigeria, Venezuela, Iran and Angola. PFC said the announced cuts should total 1.1 million barrels a day in compliance.
"While short-term markets continue to take their tempo from developments in currency and equity markets, a gradual tightening of global supplies - or rebalancing, depending on perspective - should provide a longer-term basis for a price recovery, either as winter heating demand picks up, or as the global economy begins to recover," PFC said.
The firm said it sees benchmark crude prices at $77.25 a barrel in the final quarter of 2008, rising to $85 a barrel in the first quarter of next year before falling back to $75 in the second quarter.