Before start of new oil pact, OPEC made progress averting glut
* Saudi cut leads to biggest monthly production drop since
2017
* Demand for OPEC crude in 2019 to fall about 900,000 bpd
* Report points to no surplus if new OPEC cut fully
delivered
* Developed economies' oil stocks still above five-year
average
(Adds comments from OPEC secretary general, date of OPEC
meetings)
By Alex Lawler
LONDON, Jan 17 (Reuters) - OPEC cut oil output sharply in
December before a new accord to limit supply took effect, it
said on Thursday, suggesting that producers have made a strong
start to averting a glut in 2019 as a slowing economy curbs
demand.
The Organization of the Petroleum Exporting Countries said
in a monthly report that its oil output fell by 751,000 barrels
per day (bpd) in December to 31.58 million bpd, the biggest
month-on-month drop in almost two years.
Worried by a drop in oil prices and rising supplies, OPEC
and 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.
OPEC Secretary General Mohammad Barkindo told Reuters that
producers were seeking to avoid a build-up in the industrialised
world's oil inventories above the five-year average.
They were above that mark in November, figures in OPEC's
report showed.
"We are not yet out of the winter woods," he said. "The oil
industry cannot afford to relapse into another downturn," he
said in reference to a 2014-2016 oil market slump.
The supply reduction in December means that if OPEC fully
implements the new Jan. 1 cut, it will avoid a surplus that
could weaken prices. Oil slid from $86 a barrel in
October to less than $50 in December on concerns over excess
supply.
OPEC expects 2019 global oil demand growth to slow to 1.29
million bpd from 1.5 million in 2018, though it was more upbeat
about the economic backdrop than last month and cited better
sentiment in the oil market, where crude is back above $60.
"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
in the report.
Barkindo added that he remains optimistic that "healthy
demand" would hold this year.
The supply cut was a policy U-turn after the producer
alliance known as OPEC+ agreed in June 2018 to boost supply amid
pressure from U.S. President Donald Trump to lower prices and
cover an expected shortfall in Iranian exports.
OPEC changed course after the slide in prices starting in
October. A previous OPEC+ supply curb starting in January 2017 -
when OPEC production fell by 890,000 bpd according to OPEC
figures - got rid of the 2014-2016 glut.
The group confirmed on its website that it plans to meet
over April 17-18 in Vienna to review the supply cut agreement.
OPEC sources said another meeting could follow in June.
SAUDI CURBS
The biggest drop in OPEC supply last month came from Saudi
Arabia and amounted to 468,000 bpd, the report showed.
Saudi supply in November had hit a record above 11 million
bpd after President Trump demanded more oil be pumped.
The kingdom told OPEC that it lowered supply to 10.64
million bpd in December and has said it plans to go even further
in January by delivering a larger cut than required under the
OPEC+ deal.
The second-largest was an involuntary cut by Libya, where
unrest led to the shutdown of the country's biggest oilfield.
Iran registered the third-largest decline in output, also
involuntary, as U.S. sanctions that started in November
discouraged companies from buying its oil.
Iran, Libya and Venezuela are exempt from the 2019 supply
pact and are expected by some analysts to post further falls,
giving a tailwind to the voluntary effort by the others.
OPEC said in the report that 2019 demand for its crude would
decline to 30.83 million bpd, a drop of 910,000 bpd from 2018,
as rivals pump more and the slowing economy curbs demand.
Delivering 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. Last
month's report had pointed to a surplus.
The figures for OPEC production and demand for its crude
were lowered by about 600,000 bpd to reflect Qatar's exit from
the group, which now has 14 members.
(Editing by Edmund Blair, David Evans and David Goodman)
First Published: 2019-01-17 15:20:39
Updated 2019-01-17 19:35:50
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