NEW YORK – OPEC oil supply rebounded in March, reaching its highest levels since October as Iraq's exports rebounded after bad weather and Saudi Arabia pumped at close to record rates, according to a Reuters survey.
The increase adds to excess supply in the market, despite some signs that the halving of crude prices since June 2014 is encouraging higher oil demand. Last month, OPEC supply rose to 30.63 million barrels per day (bpd) from a revised 30.07 million bpd in February, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.
"Demand might be a bit stronger than expected at the beginning of the year, but I don't think it is strong enough to absorb the entire oversupply,'' Carsten Fritsch, an analyst at Commerzbank in Frankfurt, told CNBC in a report yesterday. "There's still oversupply in the market, which is reflected in the inventory builds.''
Besides Saudi Arabia, the main reasons for the rise are the resolution of involuntary outages. The largest increase was from Iraq, whose southern oil exports recovered following bad weather that delayed tanker loadings, according to shipping data and industry sources. Libya also managed to nudge production higher last month, despite civil unrest in the country.
If the total remains unrevised at 30.63 million bpd, March's supply would be OPEC's highest since 30.64 million bpd in October 2014. Saudi Arabia was the driving force behind OPEC's refusal last year to prop up prices by cutting its output target of 30 million bpd, in a bid to discourage more costly rival supplies.
Saudi Arabia increased output to nearly 10 million bpd on average in March, sources in the survey said, due to higher demand from export customers and an increased local requirement in new oil refineries.
"The Saudis say they are responding to higher demand and I tend to believe that, looking at the strong refining margins in Singapore,'' an oil consultant told CNBC. Margins are well above the annual average in Asia, which buys the bulk of Saudi Arabia's exports.