OPEC production falls significantly on Saudi output cuts
Oil cartel fulfilling pledge to mop up excess global oil supply through co-ordinated cuts
LONDON— OPEC significantly reduced its crude-oil production in January, making good on its latest deal to curb output and rebalance an oversupplied market, the oil cartel said Tuesday.
In its closely watched monthly oil market report, the Organization of the Petroleum Exporting Countries said its crude output had fallen by 797,000 barrels a day in January, month-on month, to average 30.81 million barrels a day, citing secondary sources.
The bulk of the cuts were shouldered by Saudi Arabia— the de facto head of OPEC—as well as the United Arab Emirates and Kuwait, according to the report.
The report provides the most official data to date that OPEC is fulfilling its pledge from late last year to mop up excess global oil supply through coordinated production cuts. In December, OPEC and a group of 10 producers outside the cartel, led by Russia, agreed to hold back output by a collective 1.2 million barrels a day for the first half of 2019. OPEC member states agreed to cut 800,000 barrels a day of that quota, with Saudi Arabia—the world’s largest exporter of crude—handling a 250,000barrel a day reduction. Saudi crude output came down by 350,000 barrels a day last month, according to secondary sources, Tuesday’s report showed.
However, preliminary figures for January showed that Russian oil supply came down by just 90,000 barrels a day month-on-month, to stand at 11.56 million barrels a day last month, according to the OPEC report. As part of the December OPEC-led deal, Russia had agreed to cut 230,000 barrels a day during the first half of this year.
But the OPEC report noted that “for 2019, based on project ramp-ups in Russia, Russian oil companies are expected to potentially further increase production through greenfield development.”
The latest OPEC-led production-cut agreement, engineered by the Saudis and Russians—the world’s two biggest oil producers behind the U.S.— took effect after crude prices had plummeted by roughly 40% in the fourth quarter from four-year highs reached at the start of October.
Crude prices have since recovered around 20% from annual lows reached during the last week of December, bolstered by data last month showing OPEC had already begun dialing back output by around 750,000 barrels a day in the last month of last year.
Meanwhile, OPEC said Tuesday that total global oil supply had decreased by 1.09 million barrels a day in January, to average 99.32 million barrels a day.
The cartel slightly lowered its oil demand growth forecast for 2019, by 50,000 barrels a day, for a growth rate of 1.24 million barrels a day. The revised projection was mainly the “result of downward revisions to the economic outlook for major economies,” OPEC said.
The cartel also said that commercial oil stocks in the Organization for Economic Cooperation and Development—a group of industrialized, oil-consuming nations that includes the U.S.—fell by10.8 million barrels in December, to stand at 2.851 billion barrels. That is 28 million barrels above OPEC’s target of the latest five-year average, but 2.5 million barrels lower than the same time a year ago.