Published: Thu, February 14, 2019
Finance | By Kristine Clayton

OPEC Secretary General urges to accelerate oil production cuts within OPEC+ framework

OPEC Secretary General urges to accelerate oil production cuts within OPEC+ framework

The OPEC, which Saudi Arabia de-facto leads as the world's top crude oil exporter, said on Tuesday that it had cut its output by nearly 800,000 bpd in January to 30.81 million bpd.

"In quantity terms, in 2019, the US alone will grow its crude oil production by more than Venezuela's current output".

Like Iran, another founding member of the Organization of the Petroleum Exporting Countries, Venezuela's oil industry has been blighted by mismanagement, unrest, political instability, diplomatic isolation and sanctions.

The U.S., Venezuela's biggest customer, is banning oil imports from the country as it condemns President Nicolas Maduro for fraudulently clinging to power after disputed elections.

The oil price has risen by 20 percent so far this year, yet most of that increase came in early January, before the imposition of US sanctions on Venezuela's energy sector.

However, the granting of the waivers contributed to a sharp reversal in crude prices, with Brent dropping to a 14-month low by late November.

Brent has struggled to sustain gains this month following its best ever start to a year on concern that booming shale output will undermine cuts by OPEC and its partners, and fears that the U.S.

Since January 1, an OPEC-led group has been cutting at least 1.2 million barrels per day from production in an effort to trim the global supply and stabilize prices.

The world oil demand growth for 2019 was revised lower by 0.05 million bpd at 1.24 million bpd, citing OPEC's February Monthly Oil Market Report (MOMR) Tuesday.

Venezuela has tried to find alternative customers, especially in Asia, but under USA pressure many buyers there are also shying away from dealing with PDVSA.

The U.S. administration likely calculated any fallout from sanctions on oil prices would be small given the limited volumes of crude involved and the expectation that the standoff would be resolved quickly.

In the two weeks since the sanctions were announced, Venezuela's crude exports have reportedly tapered off and shifted toward to cash-paying buyers - such as India.

The sudden embargo on Venezuela's exports has therefore sent refiners in the United States and elsewhere scrambling to find alternative supplies compatible with their equipment.

"In terms of crude-oil quantity, markets may be able to adjust after initial logistical dislocations", said the Paris-based IEA, which advises major economies on energy policy.

John Kemp is a Reuters market analyst.

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