Opec output falls most in almost two years
london — Before its agreement to cut oil supplies even started, Opec’s production plunged by the most in almost two years last month.
In a sign of the urgency felt by the cartel amid tumbling crude prices, leading member Saudi Arabia throttled back production, according to a Bloomberg survey of officials, analysts and ship-tracking data. The group’s pact to curb output only formally started this week.
The kingdom’s deliberate cutbacks were compounded by unplanned losses in Iran, which is being targeted by US sanctions, and in Libya, where protests halted the biggest oil field.
As a result, oil output from the Organisation of Petroleum Exporting Countries fell 530,000 barrels a day to 32.6 million a day last month. It’s the sharpest pullback since January 2017, when the group first embarked on its strategy to clear the glut created by rising supplies of US shale oil.
A global coalition of oil producers known as Opec+, which comprises both members of the group and other exporters including Russia, agreed on December 7 to reduce output during the first six months of 2019. Crude prices failed to rally however, and instead slumped to the lowest in more than a year.
Investors remain concerned that Opec+ isn’t cutting enough to make way for another surge of supply anticipated from US shale oil drillers.
They’re also increasingly worried that a slowing global economy, coupled with the US-China trade dispute, will hit fuel demand and swell the pile-up of unwanted crude. “Slowdown fears” are “putting more pressure on Opec to stabilise the petroleum markets,” said Phil Flynn, markets analyst at Price Futures Group. “So let the cuts begin.”
The Saudis curtailed production by 420,000 barrels a day to 10.65 million last month, from a record of just above 11 million reached in November, the survey showed. Energy Minister Khalid Al Falih has promised to cut even deeper this month, going beyond the reductions the kingdom signed up to.
As is often the case with Opec, not all of the supply restraint seen last month was deliberate.
Libya’s production fell by 110,000 barrels a day to one million a day. Sharara, the country’s biggest oil field, has been offline since it was stormed in mid-December by an armed group and demonstrators demanding better government services.
The situation in the North African nation worsened on Wednesday when bad weather at the Es Sider port forced a separate output reduction of 100,000 barrels a day. —