OPEC said on Tuesday it had cut oil production steeply under a global supply deal, although it flagged headwinds confronting its efforts to prevent a glut this year including weaker demand and higher rival output.
In a monthly report, OPEC said its oil output fell almost 800,000 barrels per day in January to 30.81 million bpd. That is still slightly more than the demand OPEC expects for its crude on average in 2019.
Worried by a drop in oil prices and rising supplies, the Organization of the Petroleum Exporting Countries and its allies including Russia agreed in December to make supply cuts. Under the deal, OPEC is lowering output by 800,000 bpd from Jan. 1.
In the report, OPEC cut its forecast for 2019 world economic growth by 0.2 percentage point to 3.3 percent and highlighted a range of headwinds such as a slowdown in global trade.
“Some recent positive developments could support the global economy at its current level, including the recovery in oil prices, possible progress in U.S.-China trade negotiations and less-ambitious monetary tightening by the U.S. Federal Reserve,” OPEC said in the report.
“Nevertheless, this would not lift the global economy beyond the growth forecast.”
Oil extended a rally on Tuesday above $63 a barrel. Crude has risen from less than $50 in December, supported by the Saudi Arabia-led OPEC cuts and involuntary declines despite concerns about slowing demand.
The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from U.S. President Donald Trump to lower prices and cover an expected shortfall in Iranian exports.
OPEC changed course after prices slid from $86 a barrel in October, making the producers wary of a new glut. An OPEC+ cut from January 2017 had got rid of an earlier surplus.
In a sign of excess supply, OPEC’s report said oil inventories in developed economies were above the five-year average in December.