OPEC squeezes oil output to 4-year low, Russian Federation compliance low

Crude Oil Gold Natural Gas

Oil prices rose on Wednesday as producer club Organisation of the Petroleum Exporting Countries (OPEC) said it had cut supply deeply in January and as United States sanctions hit Venezuela's oil exports.

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.

OPEC members along with allies including Russian Federation agreed in early December to trim production by 1.2 mbd from January 1, in a bid to eliminate a production glut and shore up prices.

This rate could rise in coming months as top exporter and OPEC kingpin Saudi Arabia voluntarily lowers supply by more than it agreed.

Heavy-sour supplies are common in OPEC, whose members started a new round of production cutbacks last month. "Despite many uncertainties, EIA believes strong growth in global oil production will put downward pressure on prices", Capuano said.

With the supply cut delivered in January, OPEC has achieved 86 percent compliance with pledged reductions, according to a Reuters calculation - a high rate by OPEC's past standards.

Just months earlier, they had relaxed production caps as prices shot higher on market worries about the impact of U.S. sanctions on Iran.

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Oil descended into a bear market in November, a swift drop from four-year highs seen in October, as traders grew anxious over strengthening USA production and an outlook for softer global fuel demand.

USA sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

Responding to the market concerns about potential oil demand as producers try to reverse massive dips in price at the end of 2018, Falih assured that the oil market is on the right track and will soon return to its balance.

It also slightly downgraded its forecast for growth in global demand in 2019 from 1.29 million barrels per day to 1.24 million.

"The imposition of sanctions by the United States against Venezuela's state oil company Petroleos de Venezuela (PDVSA) is another reminder of the huge importance for oil of political events", the IEA said. "Saudi Arabia, are intending to push more barrels into the market to offset shortfalls" of heavier grades of crude, the IEA warned.

OPEC's Vienna-based research department reduced its estimates for the average amount of crude the world requires from the group this year by 240,000 barrels a day to 30.59 million.

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