Five major takeaways from OPEC’s January report
Here are our key takeaways from the closely watched monthly oil market report by the Organization of the Petroleum Exporting Countries (OPEC) for the month of January.
OPEC downgrades global oil demand
OPEC downgraded its world oil demand growth forecast for the sixth time in nine months, this time by 230,000 barrels to 0.99 million barrels a day, while also cutting its global economic growth forecast to 3 percent for the year.
Chinese oil demand was revised down by 0.2 million bpd in the first half of the year, when compared to OPEC’s previous month’s assessment.
The amended forecast is likely to reinforce the case for OPEC and allied non-OPEC producers, including Russia, to impose additional output cuts sooner rather than later.
Urgent need for meeting
Led by Saudi Arabia, OPEC had pushed for an emergency meeting with non-OPEC partners earlier this month in order to cut oil production to offset the impact of the coronavirus.
Saudi Arabia is OPEC’s biggest producer and has in the past often orchestrated OPEC production cuts or increases to keep oil prices at a preferred level.
OPEC was criticised for not preventing oil prices from spiking during a 2008 rally that saw Brent crude top $147 per barrel on supply fears.
The group was equally slow to react to the global financial crisis that unfolded and saw demand collapse and oil prices fall towards $30 per barrel.
Nigeria produces within production cut range
Due to the downward trend in oil prices, OPEC and its partners, including Russia, had agreed to cut output further by 500,000 bpd from January 2020 to March 2020. This is different from the previous cut of 1.2 million bpd already agreed. According to a monthly oil market report published by OPEC, Nigeria didn’t produce above the quota of 1.77 million bpd allotted.
The Middle East-dominated producer group said according to secondary sources Nigeria oil production increased from 1.75 million bpd in December 2019 to 1.77 million bpd in January 2019 while direct communications showed an addition of 38,000 bpd.
Analysts at Lagos state investment bank Cardinal Stone envisage a higher demand for Nigeria’s low sulphur Bonny light crude oil in 2020 due to the new Annex IV rule that prohibits ships from using fuels containing more than 0.5percent Sulphur from 01 January 2020, compared with erstwhile 3.5percent stipulation.
Saudi Arabia recorded the highest production increase
Production data based on secondary sources and cited in the OPEC report showed cartel Kingpin Saudi Arabia recorded the highest production increase of 57,000 barrels to 9.7 million in January 2020, those figures contrasted with OPEC’s official production data which showed an increase in Saudi production of 154,000 barrels a day.
A current OPEC+ agreement aims to cut output by 1.7 million bpd until the end of March, and Saudi Arabia has been voluntarily cutting an additional 400,000 bpd, meaning OPEC+ is effectively curbing production by 2.1 million bpd.
Libya nears total collapse
Secondary sources also revealed Libya lost 344,000 bpd from 1.1 million bpd in the previous months to 0.7 million bpd in January 2020.
According to Libya’s National Oil Company, Libya’s oil output will collapse “within days” to the lowest level since the 2011 civil war as a blockade of its export terminals have forced a rapid shutdown of production and electricity blackouts in parts of the country.