OPEC crude output falls in December '18

OPEC crude output falls in December '18

Brent for March settlement fell 46 cents to $60.86/bbl on the London-based ICE Futures Europe exchange, after closing up 68 cents on Wednesday.

West Texas Intermediate crude for February delivery lost as much as $1.33 to $50.98/bbl on the New York Mercantile Exchange, and was at $51.50 as of 11:25 a.m. local time. EIA expects non-OPEC producers will increase oil supply by 2.4 million b/d in 2019 which will offset forecast supply declines from OPEC members, resulting in an average of 1.4 million b/d in total global supply growth in 2019.

Crude oil output of the Organization of the Petroleum Exporting Countries (OPEC) dropped by 590 kb/d in December to reach 32.39 mb/d and non-OPEC supply fell by 360 kb/d in December to 61.2 mb/d, according to the IEA's Oil Market Report.

Saudi Arabia slashed its crude shipments to refiners in the U.S.by 32% to 684,000 bpd in the week ended January 11, after exporting more than 1 MMbpd the previous week, according to preliminary data from the EIA.

Alongside Russia and nine other nations, top oil exporter Saudi Arabia struck a deal with the rest of OPEC in December to keep 1.2 million b/d off the market from the start of January.

"The combination of production cuts by OPEC+ (especially the Saudis) and tightening sanctions on Iranian oil exports have brought the market close to balance", USA investment bank Jefferies said.

More importantly, Brent's six-month calendar spread has strengthened from a contango (discount) of nearly $1.80 per barrel to just 35 cents over the same period.

The IEA also reported that United States oil output will rise by 1.3 million bpd in 2019, though S&P Global Platts reported USA oil rigs dropping for the ninth consecutive week when Brent prices fell below $70 per barrel in mid-November 2018.

"US exports of petroleum products have continued to increase, and in 2017, the United States was a net exporter of several petroleum products such as motor gasoline, distillate, hydrocarbon gas liquids, and jet fuel", according to the EIA. If the United States does not intend to renew the waivers, Iran's crude oil output is likely to fall further below 2.5 million bpd. Prices got another boost later, on expectations that U.S. sanctions on Iran would cut supplies to major importers including China, India and Japan.

Meanwhile, US production rose considerably more than expected last year, adding further to supplies, while concerns about demand emerged as the US-China trade spat deepened in the second half of last year. Net imports are expected to continue to fall, to an average of 1.1 million bpd this year, and to less than 100,000 bpd in 2020.

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