OPEC Oil Output Hits Highest Since October On Iraq, Saudi

OPEC oil supply has jumped in March to its highest since October as Iraq’s exports rebounded after bad weather and Saudi Arabia pumped at close to record rates, a Reuters survey found, a sign key members are sticking to their effort to regain market share.

The increase from the Organization of the Petroleum Exporting Countries adds to excess supply in the market, despite some signs that the halving of crude prices since June 2014 is encouraging higher oil demand.

OPEC supply has risen in March 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,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “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 – Iraq lifted exports due to improved weather and Libya managed to nudge production higher despite unrest.

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, based on Reuters surveys.

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. The group holds its next meeting in June, and comments from OPEC officials suggest it will not alter the policy.

In March, the largest increase has come from Iraq, whose southern oil exports recovered following bad weather that delayed tanker loadings, according to shipping data and industry sources. Northern exports were slightly lower.

Based on this survey, Iraq’s exports have come close to December’s record high of 2.94 million bpd, depending on whether tankers at the southern ports on earlier on Tuesday actually depart in March. Iraq was hoping to reach 3 million bpd of exports this month.

Saudi Arabia has increased output to within a whisker of 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,” said an oil consultant. Margins are well above the annual average in Asia, which buys the bulk of Saudi Arabia’s exports.

Saudi Oil Minister Ali al-Naimi said on March 22 output was “around” 10 million bpd. The highest known Saudi output is 10.05 million bpd in 2013, according to figures from the U.S. Energy Information Administration.

Of countries with lower output in March, the biggest decline was in Angola, partly due to a force majeure on exports on BP’s Saturno crude stream. OPEC’s other West African producer Nigeria also exported fewer cargoes in March.