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OPEC forecasts call on its crude oil 31.67 mil b/d in Q1 2019, 31.77 mil b/d in Q2

London — OPEC will have to attain 100% compliance with its new crude oil supply cut accord and also count on continued production declines in Iran and Venezuela, if it wants to prevent a price-depressing build in oil inventories, the organization's own analysis suggests.

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OPEC and 10 allies led by Russia agreed Friday to a six-month, 1.2 million b/d production cut from October production levels starting January 2019, with OPEC shouldering 800,000 b/d of that.

Related video: OPEC/non-OPEC delivers a nail-biter in Vienna

But full compliance from OPEC would still leave the bloc some 500,000 b/d above expected demand for its crude for the first quarter of 2019 and 400,000 b/d above the call for the second quarter, OPEC's analysis arm said Wednesday in its closely watched Monthly Oil Market Report.

The deal, however, exempted sanctions-hit Iran and economically distressed Venezuela, whose production is expected to decline significantly in the months ahead. That could help bring down the projected oversupply.

Libya, whose production levels have been erratic due to internal instability, was also exempted from the cuts.

OPEC's 15 members pumped 32.98 million b/d in October, according to an average of the six independent secondary sources used by the group to monitor output.

The forecasted call on OPEC crude for Q1 2019 is 31.67 million b/d, rising to 31.77 million b/d in Q2, OPEC said in its report.

The figures all include Qatar, which has announced it is withdrawing from the organization from January. Qatar pumped 610,000 b/d in October.

The OPEC/non-OPEC coalition has scheduled its next meeting for April to review market conditions and decide on next steps.

The cuts "should contribute to sustainability of market stability," OPEC said in the report.

SAUDI OUTPUT SURGE

OPEC's analysts revised down their forecast of supply growth from outside the organization to 2.16 million b/d in 2019 from 2.23 million b/d in last month's report, largely due to the production cut agreement. Non-OPEC supply will average 62.19 million b/d in 2019, OPEC projected.

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Global demand, meanwhile, was kept unchanged at 100.08 million b/d for 2019, an expected growth of 1.29 million b/d from 2018's level.

With OPEC NGL production forecast to average 6.45 million b/d, that leaves the call on OPEC crude for the full-year 2019 at 31.44 million b/d, a 100,000 b/d decrease from last month's report.

OPEC pumped 32.97 million b/d in November, according to secondary sources, a 10,000 b/d decrease from October.

Saudi Arabia, the organization's largest member, produced 11.02 million b/d in November, secondary sources estimated, while the kingdom self-reported output of 11.09 million b/d. Both figures represent all-time highs for Saudi Arabia, which ramped up production this summer under pressure from the US to keep the market well-supplied in advance of the reimposition of sanctions targeting Iran.

Iran fell to being OPEC's fourth-largest producer in November, dropping behind the UAE, as its production plunged 380,000 b/d month on month to 2.95 million b/d in November, according to secondary sources. However many analysts expect that to rebound somewhat in the coming months, due to sanctions waivers the US granted to eight countries to continue purchasing Iranian oil through early May.

Iran did not self-report a figure for the report, with oil minister Bijan Zanganeh telling reporters at the OPEC meeting last week that he would be keeping all production data under wraps, so as not to provide the US with any leverage on sanctions enforcement.

Iraq, OPEC's No. 2 producer, pumped 4.63 million b/d in November, according to secondary sources, but self-reported 4.46 million b/d.

The UAE saw its production surge 70,000 b/d month on month to a record high of 3.25 million b/d, secondary sources estimated. It self-reported an even higher figure at 3.34 million b/d.

Nigeria self-reported a massive 300,000 b/d monthly increase in production to 1.94 million b/d, though secondary sources estimated output much lower at 1.74 million b/d.

Venezuela continued its steady decline, with output dropping 50,000 b/d in November to 1.14 million b/d, according to secondary sources, an all-time low except for a labor strike that almost halted production in late 2002 and early 2003. The country self-reported a November output figure of 1.46 million b/d.

--Herman Wang, herman.wang@spglobal.com

--Edited by James Leech, james.leech@spglobal.com