OPEC confirms Saudi Arabia cut production in December
BY JENNY GROSS
LONDON -- The Organization of the Petroleum Exporting Countries (OPEC) confirmed that Saudi Arabia slashed its oil production in December, as surging United States crude output and global economic uncertainty weighed on demand.
OPEC reported that Saudi Arabia, cut its production to 9 MMbopd, from 9.5 MMbopd in November, making it the largest monthly cut in almost three years, after the country had raised production to compensate for outages in Libya and amid Western sanctions against Iranian crude. The confirmation of Saudi Arabia's steep production cut came after reports of this emerged last week, sending the price of Brent crude above $113 a barrel, its highest level since October. The cut is in line with forecasts for lower demand for OPEC crude this year.
OPEC downwardly has further revised its expected demand for its crude in 2013, to 29.6 MMbopd. This is 100,000 bopd lower than the organization's previous forecast and 400,000 bopd lower than in 2012. The report said the effect of world economic turbulence on oil demand should be considerably milder than it was in 2012, with projected United States economic growth of 2% likely to lead to more stable oil consumption.
"Saudi Arabia will very probably need to cut at least another 500,000 MMbopd of production to offset the further increase in United States production in 2013," Petromatrix said in a note. OPEC expects United States oil production to grow by 490,000 bopd in 2013, the highest figure among all the non-OPEC producing countries, but for demand there to be flat. An expected strong increase in tight oil from the Bakken, Barnett, Permian and Eagle Ford formations will likely underpin the production increase, OPEC said.
Non-OPEC supply growth is projected at 900,000 bopd in 2013, to average 53.9 MMbopd, steady since the last report. Growth will come mainly from the United States, Canada, South Sudan and Sudan, Brazil and Australia. South Sudan and Sudan's supply is expected to double, to an average 240,000 bopd, in 2013, the report said.
According to secondary sources, crude production in OPEC countries excluding Iraq which stood at 27.4 MMbopd in December, a decrease of 270,000 bopd. Saudi Arabia's output fell in December from November to 9.2 MMbopd from 9.6 MMbopd. Oil consumption in the Middle East grew strongly, reaching about 2.9% annually, buoyed by growth in transport and industrial sectors and Iranian output decreased slightly by 21,000 bopd to 2.7 MMbopd in December from November, OPEC's secondary sources said. Iran denies that sanctions have caused such a sharp slide in production and says it produced 3.7 MMbopd in December.
Nigeria's production was at 2 MMbopd in December, up 137,000 bopd from November, according to OPEC's secondary sources. Africa's biggest oil producer ramped up production after flooding and pipeline sabotage had forced oil majors to declare force majeure on production earlier in the year.
Markets will now be watching out for the oil-market predictions of the International Energy Agency, which represents some of the world's largest oil consumers.
Dow Jones Newswires