The oil market has broken a trend of increasing tightness, with prices down from levels last seen almost four years ago, reports by Opec and the International Energy Agency show.
Oil prices easing as Opec ups output
Despite a drop in exports from Iran, global inventories were boosted by higher Opec output.
"The cycle of repeatedly tightening fundamentals evident since 2009 has been broken for now," the IEA said in its monthly report, released yesterday.
Inventories increased by as much as 1.2 million barrels per day (bpd), according to the IEA, with Opec members offsetting a 10 per cent decline in Iranian exports and falling output outside the group.
The Islamic republic is feeling the heat of the latest round of sanctions by the United States and the European Union, designed to curb its exports, and is also struggling to maintain its production levels.
Prices for crude from Opec, which includes the major Gulf producers, rose throughout the first quarter but fell off this month.
"The Opec Reference Basket sustained its hefty month-on-month gain in March to settle at $122.97 per barrel, the highest monthly average since the all-time high of July 2008," Opec said in its monthly report, which was also published yesterday. "However, the basket has weakened recently to stand at $117.80/b on 11 April."
In spite of rising stocks and increasing production, and upcoming talks between the western powers and Iran, crude prices could resume rising in coming months. The impact of the sanctions on the oil market remains unclear, and Iranian threats to close the Strait of Hormuz, the route for tankers entering and leaving the Gulf, have raised the spectre of a major disruption to supply.
"While some of this extra oil is now well positioned to meet rising summer demand from May onwards, its impact on prompt prices has been blunted by ongoing geopolitical uncertainties," said the IEA.