OPEC's oil output dipped by almost 500,000 barrels per since January, but the cartel is already looking at deepening the current reductions in response to weakening global pressures that are hammering demand for the commodity.
Saudi Arabia, the most influential OPEC member-state, fulfilled its vows to continue over-complying with the reductions and Libya's supply fell sharply as a result of the ongoing Gulf blockade, the Platts Survey reported.
OPEC's crude oil output was down by 470,000 bpd from December, to 29.10 million bpd in January, the first month in which the current stringent cuts are applied, the survey disclosed.
When 2019 came to a close, oil prices came under stress from US shale oil's ongoing boom. While OPEC and its allies have already cut production by more than 1 million barrels per day, from early 2018 to late 2019, US oil output has increased by around 2 million bpd.
While some are eager to blame soft demand with an attack on oil prices, the fact is that demand for oil continues to grow by more than 1 million bpd each year. The real challenge for OPEC has not been soft demand, but the continuing onslaught of shale oil production.
According to last week's monthly Reuters poll, OPEC's crude oil output fell to a low of 28.35 million bpd over a decade, with Saudi Arabia and its Gulf Arab allies over complying with the cuts.
Both surveys showed that the cartel managed to achieve higher cuts than expected, largely due to Saudi Arabia 'leading by example' and trimming production more than its OPEC+ share.
After a failed price war that started in 2014, the policy of OPEC was to boost oil prices by rising demand. The cartel is now in a waiting game with US shale producers, slashing production to keep prices elevated while holding out for US production to flatten or decline.
Even with the 128-percent enforcement starting last month, OPEC could be in for another round of deeper cuts as the cartel and its non-OPEC partners led by Russia are contemplating further reductions to avoid major oversupply.
The OPEC+ alliance technical panel proposes an additional 600,000 bpd reduction in response to the lower demand for oil but nothing specific has been agreed.
Russia, the largest non-OPEC member, pushed back, saying it needed more time to determine its effect on oil demand. Since then, in the second quarter of the year, the Joint Technical Committee of the cartel convened for three days and put forward a plan to extract another 600,000 barrels per day.
