Global oil prices rose to fresh two-month highs Friday after OPEC members reported the biggest monthly drop in production in nearly two years as the cartel prepped for broader output cuts to address what it sees as a glut in world markets.
OPEC said collective output from its members fell by 751,000 barrels a day last month, to 31.58 million, led by a 368,000 reduction from swing producer Saudi Arabia as the cartel prepared to meet its own agreed productions cuts that kicked-in on January 2. At the same time, OPEC trimmed its 2019 daily demand forecast by 910000 barrels to 30.85 million, citing economic and trade uncertainty. OPEC also called on members to "redouble" their efforts to keep oil markets balanced over the whole of 2019.
"Underlying challenges continue, causing the risk to world economic growth to be skewed to the downside," the OPEC report argued. "The most important issues are ongoing trade tensions, monetary tightening, particularly by the US Fed, and mounting challenges in several emerging markets and developing economies."
"The growth trend in 2H19 remains particularly uncertain as the fiscal stimulus in the US is expected to taper off, China's slow-down is forecast to continue, issues in the Euro-zone are expected to remain and India will most likely face lower growth levels," the report added.
Brent crude contracts for March delivery, the global benchmark, were up 2.1% and changing hands at $62.46 a barrel while WTI contracts for February were rising 2.7% to $53/79 a barrel..
Oil majors edged higher in European trading following the OPEC report, with BP PLC (BP) - Get Report rising 2.3% while domestically-listed rival Royal Dutch Shell PLC (RDS.A) was marked 2.7% higher at £26.96 each.
U.S. output is likely to top 12 million barrels per day this year, the Energy Information Administration said earlier this week, as the shale oil boom continues to add to swelling domestic stockpiles and push the United States to the top of the world production table.
The EIA said last month that production from the country's seven biggest shale areas, including the Permian Basin, will rise to around 8.1 million in early 2019. That's likely to add to overall U.S. output, which hit a record 11.9 million barrels per day in the week ending January 11.
That's helped drive energy sector gains over the past three months, with the S&P OIl & Gas Exploration & Production total return index rising 27.8% since mid-October. Crude's late December rebound, meanwhile, which has added more than 20% to global oil prices since the Christmas Eve trough, has lifted Chevron Corp. (CVX) - Get Report shares 12.6% higher, to $113.65 each, and rival Exxon Mobil (XOM) - Get Report 10.5% higher at $72.38 each.