Saudi Arabia: Oil prices extend gains in January as OPEC+ cuts oil supply
Oil prices recovered briskly in January after they plunged to an over one-year low in late December, with the OPEC oil basket trading at USD 61.2 per barrel on 31 January. Although the price was down 7.7% in annual terms, it marked a solid 18.7% gain from the same day in December.
The decision by OPEC and other key producers such as Russia, jointly named OPEC+, to cut oil production is gradually propping up oil prices. According to recent surveys, OPEC’s crude oil production declined by around 900,000 barrels per day (bpd) in January. This, combined with the reduction of around 750,000 bpd in January ahead of implementation of the oil cut deal, would bring total OPEC production to a multi-year low. The sharp reduction was not simply the result of the planned cuts but also influenced by supply disruptions in Libya, sanctions restraining Iran’s oil output and the meltdown of Venezuela’s oil industry. Moreover, Saudi Arabia, which is backing the bulk of output cuts, pledged on 28 January that the country will pump oil “well below” the voluntary cap for six months. Nevertheless, investors will be keeping a close eye on how the trade spat between China and the United States develops, which could shape the outlook for global oil demand going forward.
Combined crude oil output among OPEC members declined by 751,000 barrels per day month-on-month to 31.58 mbpd in December, according to the cartel’s latest monthly report. The reading mainly reflected much lower output in Saudi Arabia (December: 10.55 mbpd; November: 11.02 mbpd), as well as in Iran and Libya.