The Organization of Petroleum Exporting Countries (OPEC) said Thursday it has already slashed its crude oil output by some 750,000 barrels per day month on month in December, but that is only about halfway to the level of cuts needed to avoid a supply glut.
OPEC’s total output pumped 31.58 million barrels per day in December, down from 32.33 million barrels per day in November, according to the cartel’s oil market report, while estimating that global demand for its crude will average 30.88 million barrels per day in the first half of 2019, meaning the bloc will need to cut some 700,000 barrels per day more if it wants to avoid a build-up of oil inventories.
The report also left its 2019 global demand forecast unchanged from last month’s report at 100.08 million barrels per day, up 1.29 million barrels per day from 2018.
OPEC and its allies, including top global oil producer Russia, have aggressively targeted global inventories over the last two years, instituting output quotas to bring stocks down to the five-year average. A production surge in Saudi Arabia, Russia and other countries in the second half of 2018 has caused inventories to rise above that benchmark, prompting the 24-country OPEC/non-OPEC coalition to agree on another round of output cuts that is to last the first six months of 2019.
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Under the deal, OPEC agreed to shoulder some 800,000 barrels per day of the cuts, while Russia and the nine other non-OPEC partners committed to cut 400,000 barrels per day, but OPEC’s analysis shows those cuts may not be enough. Refinery turnarounds in the winter will add to the challenge.
The report showed that Nigeria pumped 1.75 million barrels per day, increasing production by 11,000 barrels per day, Saudi Arabia’s crude output on the other hand, fell 470,000 barrels per day in December to average 10.55 million barrels per day, according to an average of the six secondary sources that OPEC uses to gage production. Iraq’s production surged to 4.71 million barrels per day in December, up 90,000 barrels per day from November, according to secondary sources. Its quota under the deal is 4.51 million barrels per day.
The United Arab Emirates (UAE), OPEC’s third largest producer, pumped 3.22 million barrels per day in December, down 70,000 barrels per day from November, while Iran, hit by US sanctions, output plummeted 160,000 barrels per day month on month to 2.77 million barrels per day. Iran is also exempt from the production-cut deal.
Fellow exempt member Libya pumped 930,000 barrels per day, down 170,000 barrels per day from November, while Venezuela, also exempt, produced 1.15 million barrels per day, a 30,000 barrels per day drop, according to the report.