Dubai, Riyadh: Saudi Arabia expects to reduce oil output once again in February and pump for six months at levels “well below” the production limit it accepted under Opec’s oil-cuts accord, Energy Minister Khalid Al Falih said.

The world’s biggest exporter targeted production of 10.2 million barrels a day in January and is aiming to pump about 10.1 million in February, he said. Saudi Arabia’s voluntary limit under the December cuts deal with Russia and other producers was 10.33 million barrels a day.

“Saudi Arabia will be well below the voluntary cap that we agreed to” and will pump beneath its ceiling “for the full six months” of the December cuts accord, he said in a Bloomberg Television interview in Riyadh.

The Organisation of Petroleum Exporting Countries (Opec) and allies including Russia, a coalition known as Opec+, agreed to pare production starting this month in an effort to buttress sagging oil prices. Crude futures have gained this year as Saudi Arabia leads the way in curbing output amid a surge in US shale-oil supplies. Benchmark Brent crude was trading 42 cents higher at $60.35 a barrel at 10.37am in Dubai.

“Demand will start picking up at the end of the first quarter and into the second quarter,” Al Falih said. The impact of Opec+ output reductions “will trickle down into the global markets over the next few weeks.”

US oversupply

The US is currently “way oversupplied” with its own output and with oil from other western hemisphere producers, Al Falih said.

“So, as we look at the oil market, and we see it in the price differentials, it’s really not rewarding us to export a lot of oil to the US And as a result, as we make adjustments, it makes commercial sense that that’s the market that gets the majority of our cuts.”

Saudi Arabia and like-minded countries are determined to drive inventories below the five-year historical average, he said. “We’re going to do it by ensuring that supply is below demand for 2019.’

It’s still unclear what effect political turmoil in Venezuela will have on crude markets, Al Falih said. Output from the South American Opec member has languished amid escalating tensions between forces loyal to President Nicolas Maduro and those supporting opposition National Assembly leader Juan Guaido.