Dubai: Oil production by the Organisation of Petroleum Exporting Countries (Opec) fell in December, leading the organisation to estimate a smaller surplus in 2017.

In its monthly report, released on Wednesday, Opec said its December oil production fell by 220,900 barrels per day (bpd) to 33.085 million. In November, Opec pumped 33.305 million bpd, its highest output since 2008.

“A continued normalisation of monetary policies, indicating improving economic conditions, together with the recent historic cooperation between Opec and non-Opec producers, should help to bring needed stability to the oil market, hence further supporting the world economy,” the report said.

Opec also revised non-Opec supply downwards. Non-Opec production is projected to grow by 0.12 million bpd, down from its original expectation to rise 0.18 million bpd.

“Non-Opec supply adjustment commitments are somewhat challenging for those countries, however, initial reports show positive signs of compliance with pledged production adjustments,” the Opec said. The Opec and non-Opec producers plan to cut output by 1.8 million of barrels per day from January for six months.

Downward revisions to Russia, Kazakhstan, China, Congo and Norway, were partially offset an upward adjustment to US production, the Opec report said, indicating a rise supplies from the US due to higher prices.

Good news:

“Fading supply glut is a good news for the industry, but we need a lot more progress what they have to rebalance the market in terms of compliance,” said Naeem Aslam, chief market analyst with Think Markets. The February report is expected to give more clarity on the quantum of cuts from each producer.

The producer group revised the demand projections for 2017 upwards. Global oil demand growth in 2016 is expected at 1.25 million of barrel per day, mainly reflecting the better-than-expected performance in OECD Asia Pacific and Europe.

Shale oil:

The IEA official warned on rising supplies from US shale oil due to rising prices.

“US shale-oil production will definitely react strongly,” Executive Director Fatih Birol told Bloomberg Television. At $56 to $57 a barrel, “a lot of shale plays in the United States would make perfect sense to produce.”

The comments resulted in larger than expected fall in oil prices on Wednesday. Brent crude fell 1.51 per cent to be at $54.63 per barrel. West Texas Intermediate fell 1.56 per cent to be at $51.66 per barrel.