OPEC’s crude oil production in January dropped by a massive 890,000 bpd compared to December—the largest monthly decline in the cartel’s production since January 2017 when the initial production cut deal began, the monthly Reuters survey found on Thursday.
The largest production drop in two years came after OPEC’s largest producer and de facto leader Saudi Arabia, as well as its Gulf Arab allies, cut deeper than pledged in the new production cut deal effective January 1, 2019. Production declines in the three countries that won exemption from the cuts—Libya, Iran, and Venezuela—also contributed to the steepest monthly production drop at OPEC in two years, according to the Reuters survey.
Among the three exempted producers, Libya’s production and exports have been disrupted since early December due to port closures courtesy of bad weather as well as security incidents and issues at its largest oil field Sharara, which remains shut-in. With Venezuela’s crisis deepening, production continues to fall, while Iran’s oil output also drops as its exports are limited due to the U.S. sanctions.
According to the survey tracking supply to the market and based on shipping data and information provided by sources at oil companies, OPEC’s crude oil production in January was 30.98 million bpd, down by 890,000 bpd from December 2018.
Reuters data and estimates show that the eleven OPEC members bound by the pact—excluding exempted Venezuela, Libya, and Iran—reached 70 percent of the cuts they promised to deliver. Related: The Only Way For The Aramco IPO Is Downstream
OPEC and its non-OPEC partners led by Russia agreed in December to remove a total of 1.2 million bpd from the market in the first six months of 2019, with OPEC cutting 812,000 bpd and non-OPEC producers reducing output by 383,000 bpd, including a 230,000 bpd cut from Russia.
Earlier this week, Saudi Energy Minister Khalid al-Falih promised that the Kingdom would continue to overachieve in delivering its share of the cuts for the full six months of the agreement. Saudi crude oil production has been around 10.2 million bpd in January, and will be further cut to close to 10.1 million in February, al-Falih noted.
By Tsvetana Paraskova for Oilprice.com
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