LONDON (Reuters) – OPEC said on Thursday it had cut oil output sharply in December before a new accord to limit supply took effect, suggesting producers have made a strong start to averting a new glut.
The Organization of the Petroleum Exporting Countries said in a monthly report that its oil output fell by 751,000 barrels per day (bpd), month on month in December, due to cutbacks led by Saudi Arabia, Libya and Iran.
Worried by a drop in oil prices and rising supplies, OPEC and its allies including Russia agreed in December to return to production cuts in 2019. They pledged to lower output by 1.2 million bpd, of which OPEC’s share is 800,000 bpd.
The reduction in December is the biggest month-on-month drop in OPEC supply since January 2017. It means that should OPEC fully implement the new Jan. 1 measure, it will avoid creating a surplus in the market that could weaken prices.
OPEC expects global oil demand to slow this year although it was more upbeat about support from the economic backdrop than a month ago and cited better sentiment in the oil market, where prices have rallied back above $60 a barrel.
“While the economic risk remains skewed to the downside, the likelihood of a moderation in monetary tightening is expected to slow the decelerating economic growth trend in 2019,” OPEC said.
“This has recently been reflected in global financial markets. The positive effect on market sentiment was also witnessed in the oil market,” it said.
OPEC said 2019 demand for its crude would fall to 30.83 million bpd, a drop of 910,000 bpd from 2018, as rivals pump more and the slowing economy curbs demand. The figure lowered by about 600,000 bpd to reflect Qatar’s exit from OPEC.
Deliver the 800,000 bpd cut from December’s level should mean the group would be pumping slightly less than the expected demand for its crude this year and so avoid a surplus.
Reporting by Alex Lawler; Editing by Jason Neely and Edmund Blair