OPEC’s oil production fell by the most in almost two years as leading member Saudi Arabia made an early start on an initiative to prevent a surplus.
Output from the cartel’s 14 members slumped by 751,000 barrels a day last month, with just over half the reduction accounted for by the kingdom, according to a report from the Organization of Petroleum Exporting Countries’ secretariat. Saudi Arabia pledged it would lead the way as the producer group and its allies implement curbs amid sinking prices and surging shale-oil supplies from the U.S.
It’s the biggest reduction since OPEC launched a previous round of cutbacks in early 2017. Although the new curbs didn’t formally start until this month, the Saudis were eager to reverse a production surge made last summer when it appeared that U.S. sanctions on Iran might cause a supply shortfall.
Oil prices are trading at about USD 60 a barrel in London, down about 30 percent from a four-year high reached in October and below the levels most OPEC members need to cover government spending. Crude crashed late last year on concern that a new wave of U.S. shale will hit the market just as a slowing global economy puts the brakes on demand growth.
OPEC and its partners, which include Russia, agreed on Dec. 7 to cut output by 1.2 million barrels a day for the first six months of this year to stop markets from tipping into oversupply.
Saudi Arabia, OPEC’s biggest member, reduced production by 468,000 barrels a day to 10.55 million a day last month, according to the report, compiled by the research department of OPEC’s Vienna-based secretariat.
The rest of the group’s output decline was mostly made up of unplanned losses in Iran and Libya, two of the three OPEC members -- along with Venezuela -- exempt from the agreement to make deliberate cuts.
The report confirmed that OPEC will need to press on with the rest of the curbs it announced in order to keep markets balanced this year.
Pumping about 31.58 million barrels a day in December, output from the organization is about 700,000 barrels a day higher than the average needed in the first half -- roughly the amount it promised to cut.
Saudi Arabian Energy Minister Khalid Al-Falih reiterated in Abu Dhabi this week that he believes the measures will succeed in restoring equilibrium to world markets.
The report otherwise kept forecasts for global oil supply and demand mostly unchanged.