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09 December 2023

Opec raises oil output, sees higher demand

By Reuters

Opec on Thursday said it raised oil output to a two-year high in January, the latest sign that a recovering world economy and oil prices of $100 a barrel are encouraging extra supplies from the producer group.

In a monthly report, the Organisation of the Petroleum Exporting Countries said January production rose by 400,000 barrels per day (bpd) to 29.72 million bpd, the highest since December 2008 when the group announced a record cut in its output.

The signs of extra barrels from Opec follow the rise in oil prices to above $100 a barrel for Brent crude and lend weigh to other estimates, such as from the International Energy Agency, suggesting supply is increasing.

"Crude oil production experienced increase from Iraq, Saudi Arabia, Angola, and the UAE," Opec said in the report. "While crude output from Nigeria and Iran experienced decline."

The production figures in Opec's monthly report are based on secondary sources and are the closest thing Opec provides to an official estimate of supplies. Many Opec countries do not disclose their production on a timely basis.

Global demand for Opec crude this year was revised up by around 400,000 bpd to 29.80 million bpd. The group warned that oil prices would act to balance out demand.

"The down risk for the total world oil demand forecast lies with international oil prices," Opec said.
"Should strong prices remain, this will lead to a reduction in the use of transportation fuels."


The recent strength in prices was mainly driven by improving macroeconomic sentiment, cold weather, growing investment in the paper market as well as geopolitical concerns, Opec said.

However, the group questioned whether recent pricing trends for both Brent and US crude, also known as West Texas Intermediate (WTI), reflected wider market conditions.

"Recent price trends in the WTI and Brent benchmarks are more a reflection of the specific circumstances of their underlying crudes, rather than an indicator of any tightness in the physical market as a whole," Opec said.

The International Energy Agency (IEA), the energy advisory body to 28 industrialised countries, said on Thursday that Opec's recent production increase together with comfortable oil stocks should limit further price spikes.

Global oil demand in 2011 was revised up by 170,000 bpd (bdp) to 1.40 million bpd, Opec said, driven by the recent rise in winter petroleum product consumption. The group expects world economic growth of 3.9 per cent this year.

With the increase in Opec output in January, the group is meeting less than half of a production cut of 4.2 million bpd it agreed in December 2008 to combat falling prices and demand due to recession.

Opec's 11 members subject to oil output limits last month delivered just 48 per cent of the curbs agreed in December 2008, according to a Reuters calculation based on the report, down from around 52 per cent in December.

Iraq, which is not subject to Opec output agreements, made the biggest contribution to the increase