OPEC producers continue to match and better pledges made to cut their crude output. CNBC photo.
OPEC producers cut output by 1.8 million b/d to rebalance market
OPEC producers are concerned rising US shale production will kneecap the cartel’s efforts to balance the oil market and negate supply crunches resulting from plunging Venezuelan production.
In its monthly report released on Thursday, OPEC said producers from outside the cartel will most likely boost their output by 1.15 million barrels per day (b/d) in 2018. Previously, OPEC had forecast non-cartel countries to increase their production by 990,000 b/d.
“Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil,” Reuters reports OPEC said in the report.
This rise in supply could bring into question the effectiveness of the OPEC supply cut agreement. This weekend, a ministerial monitoring panel will meet in Oman to discuss the eventual exit strategy from the pact.
Despite concerns about the cuts, compliance among participants in OPEC’s output deal remained high last month, rising to 129 per cent, according to OPEC figures. This is up from 121 per cent in November. The cuts were aided by a considerable decline in Venezuelan oil output.
Venezuela’s output fell by 216,000 b/d to 1.621 million b/d in December and is believed to now be at its lowest level in decades.
The global crude glut is lessening and OPEC reports inventories in developed countries have declined by 16.6 million barrels in November to 2.933 million barrels, 133 million barrels above the five-year average.
Higher production from non-cartel producers has cut into OPEC’s market share by 60,000 b/d to 33.09 million b/d.
According to Reuters, if OPEC were to continue producing at December’s levels and other factors were to remain equal, the oil market could move into a deficit of about 670,000 b/d in 2019, drawing down inventories further.
Oil prices dipped slightly on Friday, with Brent falling 67 cents to $68.64 and US WTI dropped by 63 cents to $63.26/barrel. The Canadian Crude Index fell by 1.75 to to $38.25.
Prices remain close to the highest level since December 2014.