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Opec’s oil output fell in March to sit below the level where the cartel estimates demand for its crude this year, as attempts to tighten the market were bolstered by supply disruptions in member countries.
In its monthly market report, Opec said the group’s production – based on secondary sources used to assess members’ output – dropped 152,700 b/d to 31.9m b/d last month, led by declines in Libya, Nigeria, UAE and Iran.
The group’s in-house analysts peg demand for the group’s crude at 32.2 mb/d in 2017, suggesting bulging global inventories should start to tighten this year if their assessment is correct and output levels are maintained, even as a recovery in prices has spurred a jump in production from the US shale patch.
Opec’s analysts said stronger seasonal demand should support crude oil heading into the summer months after prices slipped to a year-low below $50 a barrel last month, with traders concerned the cartel’s attempts to tighten the market through a supply deal with non-members like Russia were being overshadowed by the snap back of US production.
The biggest declines came in Libya and Nigeria who are not subject to the output agreement struck late last year due to long-running disruptions caused by violence and political unrest in the countries. Members party to the output cut agreements also collectively trimmed output.
The return of refineries from seasonal maintenance and healthy demand, together with the high conformity observed in Opec and non-Opec production adjustments, should enhance market stability and reduce the volatility seen in recent weeks.
Oil prices have reversed their losses in March, with Brent crude oil hitting a month-high of $56.65 a barrel on Monday.
Saudi Arabia, the cartel’s largest producer, provided numbers directly to Opec saying it cut output by 111,0000 barrels a day last month to 9.9m b/d. In last month’s Opec report Saudi Arabia had posted numbers showing it raised output above 10m b/d in a move that briefly unnerved markets, before the kingdom issued a rare statement to explain the output increase was aimed at replenishing domestic inventories, rather than an attempt to increase exports.
The secondary sources used by Opec said Saudi Arabia’s production rose marginally in March but was still below 10m b/d.
The threat from US shale was laid bare in the report, however, with Opec’s analysts increasing their forecast for US production growth by 200,000 b/d to 540,000 b/d this year – making up the bulk of all supply growth outside the cartel globally. Total non-Opec supply was forecast at 580,000 b/d, Opec said, helped by less of a supply drop in Colombia and China than previously forecast.