OPEC Oil Production Drops

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    By Akanimo Sampson

    In OPEC’s Monthly Oil Market Report for this January, the organisation revealed that OPEC-14 production ‘’averaged 31.58mn bpd in December, a decrease of 751,000 bpd over the previous month. Crude oil output decreased mostly in Saudi Arabia, Libya, Iran and UAE, while production rose in Iraq.’’

    Contrary to expectations, oil price shot up to $86 per barrel of Brent crude last October, making some analysts to speculate around $100 oil on the horizon. But, the price of Brent collapsed, falling to $53 per barrel by year-end.

    In its Global Energy Weekly report, Bank of America Merrill Lynch puts forward a few forecasts for 2019.

    The firm estimates that Brent crude prices will average $70 per barrel this 2019, but noted that global demand was a key factor, ‘’…sensitivities to economic growth are also very meaningful and previous economic meltdowns have led to collapses in oil demand.’’

    Specifically, it estimated that ‘’every 1% move in global GDP shifts oil demand by 0.6mn barrels per day (bpd), suggesting Brent could drop to $35 per barrel if global GDP slows down from 3.5% to 2.0%.’’

    In terms of output, following the decision by OPEC and its allies to cut production by 1.2mn bpd in 2019, Bank of America Merril Lynch forecasts the average output decline from 2018 to 2019 to be 1.6mn bpd, with cuts starting in the first half of 2019. 

    ‘’OPEC+ members boosted output to more than offset the Iranian production declines in 2H18’’, the report noted, mentioning that around one third of the drop could be due to non-fundamental factors, although oversupply was one fundamental problem.

    ‘’Put differently, the surplus in the second half of last year was in part artificially created by the perception of an imminent shortfall that did not materialise. But now we see a major rebalancing with Saudi and UAE likely reducing output by 1.2mn bpd from November levels.’’

    It also estimated that Russia output would average 11.6mn bpd in 2019, down from average production of 11.8mn bpd in Q4 2018.

    However, Saudi Arabia dropped its output by 468,000 bpd compared to November 2018, while Libya saw cuts of 172,000 bpd and Iran, faced with US sanction, had a supply drop of 159,000 bpd. The UAE cut production by 65,000 bpd. Iraq was the only country to post a significant monthly increase in production, at 88,000 bpd.

    Non-OPEC producers increased production by 40,000 bpd in December, averaging 68.44mn bpd (a year-on-year increase of 3.24mn bpd). The increase was mainly driven by OECD Americas, the report noted.

    Overall, global production (OPEC and Non-OPEC) decreased month-on-month in December by 0.35mn bpd to average 100.02mn bpd. But year-on-year, December production grew by 2.83mn bpd, compared with production in December 2017. 

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