Opec's crude output climbed last month, as oil prices surged but economic recovery remained elusive, the group controlling 40 per cent of the world's oil supply has confirmed. The developments, outlined yesterday in the latest Opec monthly oil market report, increase pressure on the 12-member oil exporters' group to maintain discipline to mop up a glut on the international market.
"Efforts to reduce the excess supply is the key factor in supporting market stability and should help to gradually bring commercial inventories back to more healthy seasonal levels by the end of the year," Opec said in the report. Member countries have "reiterated their firm commitment to agreed production levels, as well as their readiness to respond swiftly to any developments which might place oil market stability at risk", it added.
According to Opec's latest figures, compiled from "secondary sources", the group's crude production averaged 28.27 million barrels per day (bpd) last month, up 135,000 bpd from April. It was the second consecutive month that the group's production increased. Excluding Iraq, which is not bound by a production quota, output climbed by 118,000 bpd. Angolan output rose the most followed by Venezuela and Nigeria.
Saudi Arabia, the biggest Opec producer, increased production slightly but was still below its quota. Algeria and Qatar were the only two Opec countries pumping less oil last month than in April, while crude output from the UAE and Kuwait was flat. Opec said its preliminary figures indicate that global oil supply rose slightly last month to average 83.35 million bpd, with its market share increasing slightly to 33.9 per cent.
At the same time, the group marginally cut its global oil demand forecast, projecting a 1.62 million bpd contraction this year, in place of the 1.57 million bpd drop it predicted a month ago. The revision contrasted with the International Energy Agency and US Energy Information Administration, which both raised their demand forecasts this week. Citing a "recent divergence between oil market fundamentals and prices", Opec said the oil market faces considerable uncertainty in coming months, especially regarding the sustainability of bullish market sentiment. That would depend on improvements in the real economy and financial markets, it added.
The world economy was still facing considerable challenges that could dampen or delay a global recovery, while financial markets were beginning to worry about the consequences of huge public deficits, Opec said. Echoing those concerns, Eugen Weinberg, an analyst with Commerzbank in Frankfurt, said a "massive correction" in crude prices was likely later this summer. "The market has excessively priced in the idea that a demand recovery is imminent," he told Bloomberg.
Crude retreated yesterday from a seven-month high of $72.68 per barrel reached on Thursday, as a record drop in European industrial output suggested that hopes of an economic recovery might be premature. The EU's statistics office reported industrial output in the euro region for April that was 21.6 per cent lower than a year earlier, the biggest year-on-year drop since the data series started in 1986.
Still, Opec said, "the worst appears to be behind us". "As the world economy stabilises, the world oil demand appears to be settling down." @Email:email@example.com