OPEC squeezes oil output to 4-year low, Russia compliance low

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The cartel made the pledge past year alongside major oil producing countries outside the cartel, including Russian Federation, to safeguard oil prices against a global economic slowdown.

The decrease by the group of 14 producer countries - which has long manipulated oil output to influence global prices in members' favor - brought total production to 30.81 million barrels per day in the month, the report said citing secondary sources.

OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from January 1 to prevent excess supply building up.

Previous pacts by OPEC and its partners including Russian Federation, often called OPEC+, to cut back production have been marked by initial low compliance rates by certain countries.

This rate could rise in coming months as top exporter and OPEC kingpin Saudi Arabia voluntarily lowers supply by more than it agreed.

Saudi Arabia's Energy Minister, Khalid al Falih, told the Financial Times that the kingdom would reduce production to about 9.8million bpd in March, down from a record high of 11.1million bpd in November.

According to IEA data Russian Federation made only 18 percent of its pledged cut of 0.23 mbd.

Overall, global supply fell by 1.4 mbd to 99.7 mbd in January, according to the IEA, which said cuts imposed by authorities in the province of Alberta in Canada, which is not party to the Vienna Agreement, also contributed to the reduction.

US sanctions on Iran and Venezuela, together with OPEC's output cuts, have therefore removed mostly medium and heavy oils from the market, leaving lighter grades relatively unaffected.

"In terms of crude-oil quantity, markets may be able to adjust after initial logistical dislocations", said the Paris-based IEA, which advises major economies on energy policy.

Meanwhile, Barclays bank added, "Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the USA sanctions".

Last week, the API reported a surprise crude build of 2.514 million barrels.

"The imposition of sanctions by the United States against Venezuela's state oil company Petroleos de Venezuela (PDVSA) is another reminder of the huge importance for oil of political events", the IEA said.

The agency also lowered its forecast for demand for OPEC crude, production of which the group has pledged to cut by 800,000 bpd this year as part of an agreement with Russian Federation and other non-OPEC producers such as Oman and Kazakhstan. "Saudi Arabia, are intending to push more barrels into the market to offset shortfalls" of heavier grades of crude, the IEA warned.

Further news from the IEA's report said the agency now sees demand for OPEC crude at 30.7 mbpd this year vs. 31.6 mbpd previous.

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