OPEC cut ‘biggest in almost 2 years’

Worried by a drop in oil prices and rising supplies, OPEC and its allies, including Russia, agreed in December to return to production cuts in 2019. Above, Russian Energy Minister Alexander Novak and UAE’s Oil Minister Suhail Mohamed-Al Mazrouei at OPEC headquarters, in Vienna. (Reuters)
Updated 18 January 2019
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OPEC cut ‘biggest in almost 2 years’

  • OPEC said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd
  • OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018

LONDON: OPEC said on Thursday it had cut oil output sharply in December before a new accord to limit supply took effect, suggesting producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand.
The Organization of the Petroleum Exporting Countries said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in almost two years.
Worried by a drop in oil prices and rising supplies, OPEC and its allies, including Russia, agreed in December to return to production cuts in 2019. They pledged to lower output by 1.2 million bpd, of which OPEC’s share is 800,000 bpd.
The reduction in December means that should OPEC fully implement the new Jan. 1 cut, it will avoid a surplus that could weaken prices. Oil slid from $86 a barrel in October to below $50 in December on concerns of excess supply.
OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018 although it was more upbeat about the economic backdrop than last month and cited better sentiment in the oil market, where crude is back above $60.
“While the economic risk remains skewed to the downside, the likelihood of a moderation in monetary tightening is expected to slow the decelerating economic growth trend in 2019,” OPEC said.
“This has recently been reflected in global financial markets. The positive effect on market sentiment was also witnessed in the oil market,” it said.
The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from US President Donald Trump to lower prices and cover an expected shortfall in Iranian exports.
OPEC changed course after the slide in prices starting in October. A previous OPEC+ supply curb starting in January 2017 — when OPEC production fell by 890,000 bpd according to OPEC figures — got rid of a glut formed in 2014-2016.
In a sign of excess supply, OPEC’s report said oil inventories in developed economies had stayed above the five-year average in November.
The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 468,000 bpd, the survey showed.
Saudi supply in November had hit a record above 11 million bpd.
The Kingdom told OPEC it lowered supply to 10.64 million bpd in December and has said it plans to go even further in January by delivering a larger cut than required under the OPEC+ deal.
The second-largest was an involuntary cut by Libya, where unrest led to the shutdown of the country’s biggest oilfield.
Output from Iran posted the third-largest decline, also involuntary, as US sanctions that started in November discouraged companies from buying its oil.
Iran, Libya and Venezuela are exempt from the 2019 supply cut deal and are expected by some analysts to post further falls, giving a tailwind to the voluntary effort by the others.
OPEC said in the report that 2019 demand for its crude would decline to 30.83 million bpd, a drop of 910,000 bpd from 2018, as rivals pump more and the slowing economy curbs demand.
Delivering the 800,000 bpd cut from December’s level should mean the group would be pumping slightly less than the expected demand for its crude this year and so avoid a surplus. Last month’s report had pointed to a surplus.
The figures for OPEC production and demand for its crude were lowered by about 600,000 bpd to reflect Qatar’s exit from the group, which now has 14 members.


China’s car sales decline deepens, road ahead bumpy

Updated 12 min 21 sec ago
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China’s car sales decline deepens, road ahead bumpy

  • ‘Car sales in January continued to decline, and there was no sign of improvement’
  • China has been grappling with slowing economic growth as well as the fallout of trade frictions with the US

SHANGHAI: China’s automobile sales in January tumbled 15.8 percent from a year earlier, the country’s top auto industry association said on Monday, as the world’s largest auto market hits the skids with the slump in sales extending to the seventh month.
China’s Association of Automobile Manufacturers (CAAM) said in an emailed statement to Reuters that sales dropped to 2.37 million vehicles last month. This follows a 13 percent drop in December and a 14 percent fall in November.
“Car sales in January continued to decline, and there was no sign of improvement. We estimate that February wholesales will also drop sharply” said Xu Haidong, CAAM assistant secretary general.
“The reason for the sales drop is still the slowing overall economy, and consumption decline in small and medium-sized cities” Xu said.
China has been grappling with slowing economic growth as well as the fallout of trade frictions with the United States, forces which contributed to its auto market contracting for the first time in more than two decades last year.
Beijing is now trying to persuade consumers to loosen their purse strings and has pledged to provide subsidies to boost rural sales of some vehicles and purchases of new energy vehicles.
“Q1 sales were good last year, so this year the industry expects to have negative growth in the first quarter” Yale Zhang, head of consultancy AutoForesight, said, but he predicts sales to gradually pick up in the next three quarters.
Industry executives also say China’s car sales in January and February tend to be affected by the Lunar New Year holiday, as consumers hold off on their car purchasing decisions around the festival.
The holiday’s dates change annually but tend to occur in either month. It took place in the first week of February this year.
China’s sales of new energy vehicles, however, continued to buck the trend, totaling 95,700 in January, a year-on-year increase of 140 percent, CAAM said.