OPEC said Feb. 12 it had cut oil production steeply under a global supply deal, although it flagged headwinds confronting its efforts to prevent a glut this year including weaker demand and higher rival output.
In a monthly report, OPEC said its oil output fell almost 800,000 barrels per day (bbl/d) in January to 30.81 million bbl/d. That is still slightly more than the demand OPEC expects for its crude on average in 2019.
Worried by a drop in oil prices and rising supplies, OPEC and its allies including Russia agreed in December to make supply cuts. Under the deal, OPEC is lowering output by 800,000 bbl/d from Jan. 1.
In the report, OPEC cut its forecast for 2019 world economic growth by 0.2 percentage point to 3.3% and highlighted a range of headwinds such as a slowdown in global trade.
"Some recent positive developments could support the global economy at its current level, including the recovery in oil prices, possible progress in U.S.-China trade negotiations and less-ambitious monetary tightening by the U.S. Federal Reserve," OPEC said in the report.
"Nevertheless, this would not lift the global economy beyond the growth forecast."
Oil extended a rally on Feb. 12 above $63 a barrel. Crude has risen from less than $50 in December, supported by the Saudi Arabia-led OPEC cuts and involuntary declines despite concerns about slowing demand.
RELATED: Analysts: OPEC Decision Good For Global Market, US Shale Producers
The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from U.S. President Donald Trump to lower prices and cover an expected shortfall in Iranian exports.
OPEC changed course after prices slid from $86 a barrel in October, making the producers wary of a new glut. An OPEC+ cut from January 2017 had got rid of an earlier surplus.
In a sign of excess supply, OPEC's report said oil inventories in developed economies were above the five-year average in December.
Saudi Curbs
The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 350,000 bbl/d, the report showed.
RELATED: Saudi Crude Output To Fall In March
With the supply cut delivered in January, the 11 OPEC members expected to cut supply under the deal achieved 86% compliance, according to a Reuters calculation—a high rate by OPEC's past standards.
This could rise in coming months as Saudi Arabia voluntarily lowers supply by more than it agreed.
Saudi Arabia plans to pump around 9.8 million bbl/d in March, more than 500,000 bbl/d below its target under the deal, its energy minister told the Financial Times.
And further declines in Iran, Libya and Venezuela—exempt from the supply pact—could give a tailwind.
OPEC said in the report that 2019 demand for its crude would decline to 30.59 million bbl/d, a drop of 240,000 bbl/d from its last report, as rivals such as the U.S. boost output and the slowing economy limits demand.
This implies that the global market would see a slight surplus of about 200,000 bbl/d in 2019 should OPEC keep pumping at January's rate although—other things being equal—the Saudi plan to reduce supply further will offset this.
OPEC forecast global oil demand would grow by 1.24 million bbl/d in 2019, down 50,000 bbl/d from last month. Non-OPEC producers will boost output by 2.18 million bbl/d, 80,000 more than expected previously.
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