Published: Wed, February 13, 2019
Finance | By Loren Pratt

Opec oil production falls as Saudi Arabia slashes output

Opec oil production falls as Saudi Arabia slashes output

In its monthly report, Opec said it produced 797,000 fewer barrels per day in January than in the previous month, a decrease in line with the cartel's pledge to curb output in a bid to boost sagging prices.

Oil Storage Tanks at Cushing, OKThe global oil market will struggle this year to absorb fast-growing crude supply from outside OPEC, even with the group's production cuts and US sanctions on Venezuela and Iran, the International Energy Agency said in a report on Wednesday. Since January 1, an OPEC-led group has been cutting at least 1.2 million barrels per day from production in an effort to trim the global supply and stabilize prices. Saudi Arabia is responsible for most of that reduction. OPEC supply cuts, coupled with U.S. sanctions on Iran and Venezuela, have eased concerns of a glut.

Compliance by non-OPEC participants was only 25 percent, however, it said.

The oil price has risen by 20 percent so far this year, yet most of that increase materialised in early January, before the imposition of U.S. sanctions on Venezuela's energy sector.

Should US-China talks succeed, the US bank said oil markets would "switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply".

Oil descended into a bear market in November, a swift drop from four-year highs seen in October, as traders grew anxious over strengthening United States production and an outlook for softer global fuel demand.


Venezuela's crude production slumped from 3.8 million barrels per day in 1970 to just 1.7 million bpd in 1985, recovering to 3.4 million bpd in 1998 before slumping again to 2.1 million bpd in 2017.

The country's very dense crudes, some of which barely float on water, are complicated to process and sell for a large discount compared to other producers.

OPEC forecast global oil demand would grow by 1.24 million bpd, down 50,000 bpd from last month and weaker than 1.47 million in 2018.

But while Venezuela's crude now accounts for a very limited share of the global oil market, it plays a much more important role in the niche market for heavy crude.

"The imposition of sanctions by the United States against Venezuela's state oil company Petroleos de Venezuela (PDVSA) is another reminder of the huge importance for oil of political events", the IEA said.

Estimates for how much crude is needed from OPEC were lowered by 300,000 barrels a day from last month's assessment amid surging supplies from its rivals, driven by the USA shale boom.

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