OPEC oil production sinks in December as Saudis cut output more than expecte

Mahmud Turkia | AFP | Getty Images

A file photo showing a Libyan oil worker from the Libyan National oil and gas company checks an oil pipelines at the Zawiya oil installation in Zawiya, Libya.

• OPEC's oil output falls by 751,000 barrels per day to 31.6 million bpd in December, the producer group reports.
• Saudi Arabia slashes production by 468,000 bpd to just over 10.5 million bpd.
• The drop shows OPEC got a jump on a deal with 10 other nations to cut production beginning in January.

When OPEC announced the deal, Saudi Energy Minister Khalid al Falih initially said his country's output would fall to 10.7 million bpd in December from a record high 11.1 million bpd in November. The Saudis are targeting another drop to 10.2 million bpd this month, Falih has said.

The pullback in OPEC production was deepened by supply disruptions in Libya and Iran.

Output in Libya fell by 172,000 bpd to 928,000 bpd in December, after a group of armed protesters and aggrieved workers took over the country's largest oil field.

 Iraq saw the biggest jump in production in the final month of the year. It's output rose 88,000 bpd to just over 4.7 million bpd. At that level, Baghdad would need to cut about 200,000 bpd in January to meet its quota under the supply cut agreement. Iraq, OPEC's second largest producer, regularly pumped above its quota throughout the group's last round of supply cuts.

December marks OPEC's first monthly report since Qatar left the organization amid an ongoing blockade against the Gulf nation by neighbors including Saudi Arabia and UAE.

Excluding Qatar, OPEC forecasts demand for the group's oil will average 30.8 million bpd in 2019, about 900,000 bpd lower than last year. Demand for OPEC's oil fell by about 1.2 million bpd last year, the group says.

OPEC+ collaboration is 'essential'

OPEC's forecast for growth in oil supply and demand is largely unchanged from its last report. It sees worldwide consumption increasing by 1.29 million bpd to just over 100 million bpd.

OPEC revised its outlook for non-OPEC output growth slightly lower, but still sees 2019 supply growth at 2.1 million bpd, outstripping the increase in demand.

In its final report of the year, OPEC highlighted the rise in U.S. interest rates and tightening monetary policy elsewhere in the world. OPEC notes that central bankers appear poised to tap the brakes on further tightening in 2019, which could have implications for global economic growth and the oil market.

"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.

"If the anticipated moderation in monetary policies coupled with an improvement in financial markets materializes, this could provide further support to ongoing increases in non-OPEC supply."

The potential increase in crude supply will make it essential for OPEC, Russia and other producer nations to continue coordinating production to keep the oil market balanced, the group said.