OPEC fell just short of its production goal in January, as a fresh round of output cuts from the 14-nation producer group got under way.
The slight miss comes as the group once again cut its outlook for global oil demand in 2019. Meanwhile, OPEC slightly increased its forecast for supply from the United States and other non-OPEC nations.
OPEC is partnering with 10 non-member nations, including Russia, to keep 1.2 million bpd off the market. The so-called OPEC+ alliance aims to prevent another price-crushing oil glut like the one that gripped the market between 2014 and 2016.
In January, OPEC managed to remove 797,000 barrels per day from the market by holding back supply. The group aimed to cut a combined 812,000 bpd in a bid to drain oversupply from the oil market.
Total OPEC production stood at just over 30.8 million bpd in January, down from 31.6 million bpd in December, according to independent sources cited by the group in its monthly report.
The biggest cuts by far came from top OPEC producer Saudi Arabia. The kingdom pumped about 10.2 million bpd in January, down 350,000 bpd from December and nearly 100,000 bpd below its official quota under the output cutting deal. The kingdom will continue to cut production, reducing output to about 9.8 million bpd in March, Saudi Energy Minister Khalid al-Falih told the Financial Times in an article published on Tuesday.
The next biggest cuts came from the United Arab Emirates and Kuwait, though UAE pumped slightly above its quota last month.
Altogether, half of the participating OPEC countries exceeded their quota during the first month of the deal, though some just barely pumped above target.
The biggest miss came from Iraq, which regularly surpassed its limit during OPEC’s last production cutting deal that ran from January 2017 through the June 2018. OPEC’s second biggest producer pumped nearly 4.7 million bpd last month, 157,000 bpd above its quota.
Nigeria, which was exempt from the last round of output curbs, overshot its cap by 107,000 in January. Figures provided directly from the country showed Nigeria pumped in line with its quota.
OPEC’s effort to throttle back supplies got a boost from production declines in Iran and Libya, the two member countries that are exempt during the current deal.
Iran’s production ticked slightly lower as the nation weathered its third month under U.S. energy sanctions. Meanwhile, Libya’s output fell by 52,000 bpd as the country’s largest oilfield remained sidelined by a dispute with workers and armed protesters.
Demand outlook weakens
OPEC and its allies agreed to cut output in December as slowing demand growth and rising supply contributed to a more than 40-percent drop in oil prices in the final quarter of 2018.
On Tuesday, OPEC said it now expects the world’s appetite for oil to grow by 1.24 million bpd, or 50,000 bpd less than its last estimate. The revision is just a fraction of global demand, which is expected to hit 100 million bpd in 2019, but OPEC has already cut its forecast several times in recent months.
OPEC knocked down its forecast based on lower economic expectations in the developed Americas, Europe, Latin America and the Middle East.
“Over the past two years, global oil demand has turned out to be higher than expected, supported by healthy economic activities, particularly in the OECD,” OPEC said in the report. “With economic momentum expected to slow in the current year … this makes economic developments in the major consuming nations a key factor to monitor going forward.”
Meanwhile, OPEC increased its forecast for non-OPEC production by 80,000 bpd to 2.18 million bpd, citing higher-than-expected output from the U.S. Gulf of Mexico.
In 2019, OPEC expects the world to need 30.6 million bpd from the group’s members, down 1 million bpd from last year.