Opec Steadies Production In January

Saudi Arabia’s ability, and willingness, to adjust output up or down to offset production volatility from fellow Opec members has steadied the ship in recent months. With market rebalancing delicately poised, and Venezuela, Nigeria and Libya remaining unstable, the need for flexibility from Riyadh is set to grow in 2018.

January’s collective output was 560,000 b/d above the grouping’s nominal 31.92mn b/d production target – based on the agreed upon 32.5mn b/d plus Equatorial Guinea which joined in 2017, less Indonesia, which suspended membership in November 2016. Opec has never hit the target: the closest it got was 170,000 b/d above in April 2017 (see chart).

With growing debate about whether global oil inventories are now too threadbare, a sizeable Opec cut from current levels would unlikely have been welcomed by markets. Prices have weakened from their two-year highs this week, with Brent falling below $65/B ( MEES, 9 February ) but market fundamentals continue to point towards rebalancing.


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