Opec boosts crude oil output during March

Output from the oil producing nations that make up Opec rose sharply in March, led by Saudi Arabia, its de facto leader, adding to a supply glut that has pressured crude prices.

Opec pumped 30.80m barrels a day last month, an increase of 810,000 from February, based on assessments from secondary sources quoted in the cartel's monthly report.

Saudi Arabia, which produces around a tenth of the world's oil and is Opec's leading producer, increased its crude output by 658,000 b/d to 10.29m b/d, eclipsing its recent peak of 10.2m b/d in August 2013.

"Crude oil output increased mostly from Saudi Arabia and Iraq, while Libya saw a return of about 165,000 b/d from shut-in wells in active oilfields," Opec said in the report.

The figures on Saudi production are in line with the level of 10.3m b/d announced by Saudi Arabia's oil minister Ali Al-Naimi at a conference last month and constitute further evidence of the Kingdom's determination not to cede market share to rival producers.

Saudi Arabia and its Gulf neighbours were instrumental in Opec's decision in November not to cut production in spite of falling oil prices at the time.

"Saudi Arabia says it produced a record high 10.3m b/d in March, an indication that regaining export market share is the Kingdom's priority, regardless of whether it comes in the form of crude oil or product exports," said Tamas Varga of PVM, an oil brokerage.

In the wake of the Opec report, oil prices were lower, surrendering some of their gains made on Wednesday when they hit their highest level for the year. ICE June Brent, the international oil benchmark, fell 88 cents to $62.47 a barrel, while its US equivalent Nymex May West Texas Intermediate dropped $1 to $62.52 a barrel.

Opec expects demand for its oil will average 29.27m barrels a day in 2015, an increase of 80,000 barrels on its previous forecasts. If the cartel continues to keep pumping at the same rate as March, the report indicates there will be excess supply of 1.53m barrels a day in 2015. Opec has a production target of 30m b/d.

On the supply side, the report forecast non-Opec supply to rise by 680,000 a day this year, a downward revision from its previous forecast of 850,000 b/d, in part because of slowing output in North America.

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Brent has rallied more than 30 per cent since closing at a six-year low of $46 a barrel in January, bolstered by signs of increased demand and more recently signs of a slowdown in US shale production.

Projections from the US Energy Information Administration published earlier this week showed output from the fastest-growing shale fields falling 45,000 b/d to 4.98m b/d in May from April, the first monthly decline in over four years. Meanwhile, recent data showed the number of rigs drilling for oil in the US had fallen 53 per cent to 760 over the past six months.

In spite of this data, many analysts believe the recovery in prices will be shortlived. The International Energy Agency, which tracks oil data for western countries, reckons the rebalancing of the global oil market may still be in its early stages and the outlook is "only getting murkier".

The IEA thinks advances in nuclear talks between Iran and world powers could have encouraged producers to hike supply and "stake out market share" ahead of more Iranian barrels coming to market.

"Oil prices are in a mini uptrend, but fundamentals look very bearish for the second quarter so it will take something special for current price levels to hold," said Mr Varga.

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