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

Crude Oil

Crude Oil

Iran's crude oil production plunged to 2.754 million barrels per day (mb/d) in January 2019, about 1.064 million barrels per day less than in May 2018, when the United States withdrew from the 2015 nuclear agreement, OPEC said February 12.

OPEC also said that it expected the world's appetite for oil to grow by 1.24 million barrels, around a 1.3 percent increase in global annual demand, which is expected to reach 100 million barrels in 2019.

"Crude-oil quality is another issue, and, in the wider context of supply in the early part of 2019, it is even more important".

Iran's January oil production is the lowest level since October 2014, during the tightest period of previous round of global sanctions (2012-2016), imposed on Iran's oil exports.

"This report is bearish", said Phil Flynn an oil analyst at Price Futures Group in Chicago.

IEA figures show Venezuala's output dropping by roughly 30,000 barrels per day to 1.26 mbd.

The oil price has risen 20% so far this year, yet most of that increase materialised in early January, before the imposition of United States sanctions on Venezuela's energy sector.

Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.

The fear of crude prices dropping into the $40s or lower has faded.

Venezuelan armed-forces backed Socialist president, Nicholas Maduro had been in the pursuit of OPEC support against USA sanctions inclined on country's oil industry, as Maduro sent a letter to OPEC headquarter on January 29th, citing the impact of sanctions on oil prices and the potential risk, the sanction could forge for other OPEC nations, revealed by a Reuters' reporter later on Monday (February the 11th).

The country's very dense crudes, some of which barely float on water, are complicated to process and sell for a large discount compared to other producers.

Venezuela's production has nearly halved in two years to 1.17 million bpd, as an economic crisis decimated its energy industry and US sanctions have now crippled its exports.

The U.S. Treasury's guidance, which appears deliberately unclear, has left many third-country buyers uncertain about whether they can do business with PDVSA without also falling foul of sanctions.

The oil price has risen sharply on Tuesday. OPEC and other countries will either have to continue curbing extraction to maintain prices in the future or accept an energy independent USA and the likely oversupply of energy that would bring to the market. Venezuela announced that it would sell more oil to India. "This is because, in terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations", the group added.

John Kemp is a Reuters market analyst.

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