The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday announced that it cut oil production through a global supply deal.
OPEC posted oil output of 30.81 million barrels per day, down 800,000 barrels per day in January. The 2019 demand for OPEC crude was pegged at 30.59 bpd.
With slumping oil prices and jump in supply, the OPEC bloc and allies such as Russia agreed to the supply cuts. This move is to arrest headwinds and prevent a glut this year.
In a report by the OPEC, the bloc also cut its world economic growth forecast for 2019 by 0.2 percentage points to 3.3%.
The trade bloc, in a statement, said, “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.”
“Nevertheless, this would not lift the global economy beyond the growth forecast,” it added.
Last month, oil prices slipped after signs of economic slowdown in China became evident. This caused a ripple effect, casting a shadow of doubt on the demand for fuel and global growth.
THE CASE OF CHINESE ECONOMY
In January, reports emerged that China’s economy might slow to 6.3% in 2019 due to weakening domestic demand. The US tariffs added to the Asian countries woes. This expected growth of the Chinese economy would be the lowest in 2018. The economy was expected to grow by 6.6% in 2018, while it grew by 6.9% in 2017.
Analysts also say that with domestic headwinds remaining strong, the economy is expected to soften further. In the fourth quarter of 2018, growth fell to 6.4%. It was 6.8% in the first quarter.
As of now, Saudi Arabia plans to generate around 9.8 million bpd in March according to a statement by its energy minister.
The OPEC also estimated that global oil demand might rise by 1.24 million bpd, 50,000 bpd lower than last month and 1.47 million bpd lower than in 2018.
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