Vienna – OPEC’s crude production remained steady last month before the onset of new supply cutbacks by the group and its allies.
OPEC pumped an average of 28.05mb/d in December as it persevered with supply restraints agreed earlier in the year, according to a Bloomberg survey. Reductions by the United Arab Emirates and Angola were offset by other countries such as Nigeria.
Production is set to fall further this month, as the wider coalition known as OPEC+ begins additional cuts of roughly 900,000 bpd in a bid to stave off a new surplus and defend flagging crude prices.
Oil futures have slumped roughly 20% since they neared $100 a bbl four months ago, amid surging supplies from the U.S. and OPEC’s other rivals. The extra crude could prove too much for global fuel demand, which is projected to see considerably slower growth this year. Brent crude traded near $78 a bbl on Wednesday.
The UAE made last month’s biggest supply reduction, cutting by 70,000 bpd to 3.08 MMbpd. That still left the country’s output above its quota for December, and also higher than a new, increased target that takes effect this month.
Angola’s production declined once again in the country’s final month as an OPEC member, dwindling by 40,000 bpd to 1.1mb/d. Luanda announced late last month it would quit the group, effective Jan. 1, ending 16 years of membership amid a bitter dispute over its production quota.
The West African nation refused to accept a reduced limit imposed by OPEC’s leaders, but its output in December — eroded by years of underinvestment — was in line with the level it had rejected.
Supply declines from these two members were tempered by increases elsewhere. Nigeria bolstered supplies by 50,000 bpd to 1.49mb/d in December, in line with a revised quota that it successfully negotiated for this year.
Crude traders are skeptical that the 22-nation OPEC+ alliance will fully deliver on the fresh supply curbs taking effect this month, as many members have already lost as much production — and associated revenue — as they can afford. The International Energy Agency estimates the pledged cutback will translate into an actual cut of about 500,000 bpd.
Iraq, which has a patchy track record on implementation and pressing financial needs for export revenue, would need to cut production by a substantial 290,000 bpd in order to meet its target for January.
OPEC+ will hold an online monitoring meeting to review market conditions on Feb. 1, and ministers are scheduled to meet in person at the group’s Vienna headquarters in early June.
Bloomberg’s survey is based on ship-tracking data, information from officials and estimates from consultants, including Kpler Ltd., Rapidan Energy Group and Rystad Energy A/S.
*Grant Smith, Julian Lee & Bill Lehane – Bloomberg
