Opec tightens its taps as global oil demand stalls

Roman Schwartz
February 13, 2019

Oil prices have remained steady near $60 a barrel in London even as turmoil builds in Venezuela, as markets work through plentiful supplies accumulated a year ago, the IEA said.

In the report, OPEC said its oil output fell by 797,000 bpd month on month to 30.806 million bpd in January.

OPEC members along with allies including Russian Federation agreed in early December to trim production by 1.2 mbd from January 1, in a bid to eliminate a production glut and shore up prices.

Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.

The IEA said that compliance with the so-called Vienna Agreement was 86 percent by OPEC states, with Saudi Arabia, UAE and Kuwait cutting by more than promised.

Saudi Arabia will reduce oil production to nearly 9.8 million barrels per day in March, Minister of Energy, Industry and Mineral Resources and Chairman of Saudi Aramco Khalid Al-Falih told the Financial Times.

Venezuela accounted for 16 percent of OPEC output and 8 percent of world production in 1970 but those percentages had fallen to just 5 percent and 2 percent respectively by 2017 (https://tmsnrt.rs/2E4Pfb9).

According to IEA data Russian Federation made only 18 percent of its pledged cut of 0.23 mbd.

You Gotta See Dua Lipa's Priceless Reaction to Winning First Grammy
Tonight's Best New Artist win marks Lipa's second Grammy win and her second nomination. "So many women!" Lipa continued. Vincent won for Best Rock Song for her album's title track "Masseducation", and Dua Lipa for Best New Artist .

The agency also lowered its forecast for demand for OPEC crude, production of which the group has pledged to cut by 800,000 bpd this year as part of an agreement with Russian Federation and other non-OPEC producers such as Oman and Kazakhstan.

Just months earlier, they had relaxed production caps as prices shot higher on market worries about the impact of United States sanctions on Iran.

While US crude production is expected to grow by an amount that exceeds Venezuela's current output, the IEA warned that quantity is not the only important issue.

USA sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

Should US-China talks succeed, the US bank said oil markets would "switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply".

The IEA left its demand growth forecast for 2019 unchanged from its last report in January at 1.4 million barrels per day.

The sudden embargo on Venezuela's exports has therefore sent refiners in the United States and elsewhere scrambling to find alternative supplies compatible with their equipment.

That is still slightly more than the expected 2019 demand for OPEC crude, which the producer group lowered to 30.59 million bpd.

Other reports by

Discuss This Article

FOLLOW OUR NEWSPAPER