OPEC Cuts Oil Output to 14-Month Low Amid Economic Uncertainty
OPEC reduced its production to the lowest level in 14 months as budget wrangles in the U.S., uncertain impact of stimulus measures in Japan and Europe’s struggle to boost growth cloud outlook for fuel demand.
The Organization of Petroleum Exporting Countries cut output by 465,000 barrels a day in December to 30.4 million, the lowest since October 2011, led by a reduction in Saudi Arabia, the group said today in its monthly report, citing secondary sources. That’s 800,000 a day more than the average 29.6 million the group estimates it will need to provide this year. OPEC kept is 2013 global demand forecast unchanged.
“Fiscal uncertainties persist,” OPEC’s Vienna-based secretariat said in the report. “The U.S. is not the only country faced with fiscal challenges” as the impact of stimulus in Japan is unclear and “there remains some uncertainty about the near-term future development” in Europe.
Brent crude futures, trading at about $110 a barrel in London today, advanced 3.5 percent last year as threats to supply in the Middle East were balanced by risks to demand from Europe’s debt crisis and the U.S. budget dispute.
The drop in OPEC production last month is the steepest since March 2011, when Libya’s exports were halted during the uprising against deposed leader Muammar Qaddafi. Group output remains 400,000 barrels a day more than the collective target of 30 million reaffirmed at the organization’s most recent meeting in December.
Saudi Arabia, the world’s largest crude exporter, cut output by 420,800 barrels a day in December to 9.2 million, OPEC said. The second-largest decline last month was in Iraq, where supplies fell 196,300 barrels a day to 3 million. Production also dropped in Iran, by 20,400 barrels a day to 2.7 million.
In addition to supply data compiled from secondary sources, OPEC also provides production numbers submitted directly by member countries. Saudi Arabia pumped 9.023 million barrels a day in December, according to its submission. The number is the same as that given by a person with knowledge of the Kingdom’s oil policy on Jan. 10.
OPEC boosted estimates for supplies from outside the group by about the same amount as it lowered projections for demand for its own crude.
Non-OPEC producers such as the U.S., Canada and Brazil will bolster output by 900,000 barrels a day to 53.9 million this year, according to the report. That’s about 85,000 a day more than OPEC estimated last month.
Global oil demand will increase by 760,000 barrels a day, or 0.9 percent, this year to 89.6 million barrels, OPEC said.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The organization is next scheduled to meet in May.
The International Energy Agency, an adviser to consuming nations based in Paris, will publish its next monthly forecasts of supply and demand on Jan. 18.
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