We estimate that OPEC production fell m/m by a sizable 1.05 mb/d to 30.68 mb/d in January, which was the lowest level since February 2015. In y/y terms, output was down by 1.35 mb/d. Still, compliance with the new OPEC+ deal was only 56%, as a series of key producers undercomplied with their production target (namely, Iraq, Kuwait and Nigeria).
Saudi Arabia led from the front, enacting the largest production cut of all OPEC members, with output down m/m by 0.45 mb/d to 10.20 mb/d (134% compliance). Production is likely to fall to 10.1 mb/d in February and 9.8 mb/d in March, as stated by the Saudi energy minister. The UAE followed suit by reducing output m/m by 0.25 mb/d to 3.08 mb/d (92% compliance). Though not bound by the new OPEC+ deal, Libya recorded a 0.11 mb/d m/m decline to 0.74 mb/d due to the closure of the 0.30 mb/d Sharara oilfield. However, we now expect this field to reopen by the end of February, boosting Libyan output to 0.98 mb/d in March, from 0.77 mb/d in February. In Iraq, production went down m/m by 60 thousand b/d to 4.58 mb/d (52% compliance), while Kuwait’s output was down m/m by 60 thousand b/d to 2.78 mb/d (34% compliance). Iran’s output fell again m/m, by 50 thousand b/d to 2.45 mb/d, as loadings fell due to bonded storage being full in China and despite the resumption of exports to Japan and South Korea. Production in Angola dropped m/m by 30 thousand b/d to 1.5 mb/d (60% compliance). While Venezuela recorded a marginal m/m decrease, we expect output to fall m/m by 0.25 mb/d to 0.95 mb/d in February, due to the introduction of US sanctions in late January.
Nigeria was the only country that recorded higher output. Production was 30 thousand b/d higher m/m at 1.91 mb/d and well above its new OPEC+ target (i.e. negative compliance). The start-up of the new 0.20 mb/d Egina field was the main factor behind this output hike.
The average of third-party estimates we collect shows OPEC output falling to 31.25 mb/d in January. The main difference with our estimates was Nigeria recording a m/m decline by 30 thousand b/d to 1.74 mb/d, versus our above estimate of a m/m increase.
We expect total OPEC production to fall to 30.31 mb/d in Q1 19, sharply down from 31.94 mb/d in Q4 18 and down from our December forecast of 31 mb/d for Q1 19. The new OPEC+ deal, reinforced by Saudi Arabia’s overcompliance and combined with significant production declines in Venezuela and Libya (until March), will significantly lower production. OPEC output in Q2 19 should come in higher at 30.62 mb/d, as Libya’s output recovers.