OPEC reduced production to the lowest level in 14 months as budget wrangles in the U.S., speculation about stimulus measures in Japan and Europe’s struggle to boost growth clouded the outlook for fuel demand.
The Organization of Petroleum Exporting Countries cut output by 465,000 barrels a day in December to 30.4 million, the lowest since October 2011, led by a reduction in Saudi Arabia, the group said today in its monthly report, citing secondary sources. That’s 800,000 a day more than the average 29.6 million the group estimates it will need to provide this year. OPEC kept its 2013 global demand forecast unchanged.
“If Saudi Arabia sees slower export demand they might be supplying the world with less,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd. in London. U.S. deficit talks are “probably the biggest uncertainty and if we pass that successfully, demand will pick up.”
Brent crude futures, trading at about $110 a barrel in London today, advanced 3.5 percent last year as threats to supply in the Middle East were balanced by risks to demand from Europe’s debt crisis and the U.S. budget dispute.
The drop in OPEC production last month is the steepest since March 2011, when Libya’s exports were halted during the uprising against deposed leader Muammar Qaddafi, and is the closest OPEC has come to its 30 million-barrel target since its introduction in 2012. Group output remains 400,000 barrels a day more than the 30 million limit, reaffirmed at the organization’s most recent meeting in December.
Saudi Arabia, the world’s largest crude exporter, cut output by 420,800 barrels a day in December to 9.2 million, OPEC said. The second-largest decline last month was in Iraq, where supplies fell 196,300 barrels a day to 3 million. Production also dropped in Iran, by 20,400 barrels a day to 2.7 million.
In addition to supply data compiled from secondary sources, OPEC also provides production numbers submitted directly by member countries. Saudi Arabia pumped 9.023 million barrels a day in December, according to its submission. The number is the same as that given by a person with knowledge of the kingdom’s oil policy on Jan. 10.
“Demand is not in good shape,” United Arab Emirates Oil Minister Mohamed Al-Hamli said at the World Future Energy Summit in Abu Dhabi today. OPEC is “waiting to see how the European crisis is being handled.”