Oil prices have tumbled following a report that stocks are rising worldwide.
The price of crude was at its lowest in three months on Tuesday after the revelation by OPEC, which also said there was a surprise jump in production by the group’s biggest member, Saudi Arabia.
The Saudis increased output in February by 263,000 barrels per day to 10 million bpd, after in January making a larger cut than required by an OPEC accord. They did that to ensure strong initial compliance with the deal.
OPEC recently agreed to reduce output – for the first time in eight years – as part of efforts to clear a glut of oil and push up prices. Russia and 10 other non-OPEC producers also agreed to production cuts.
At the same time OPEC raised its forecast of production this year from countries outside the group as the rise in oil prices following the supply cut has helped spur a revival in US shale drilling.
“Despite the supply adjustment, stocks have continued to rise, not just in the US, but also in Europe,” OPEC said.
“Nevertheless, prices have undoubtedly been provided a floor by the production accords.”
OPEC maintains that stockpiles will begin to fall thanks to the supply cut, saying that in the second half of the year “the market is expected to start balancing or even see the start of a drawdown in oil inventories.”
The report revised upward its forecast for world oil demand in 2017 and said the requirement for OPEC crude would average 32.35 million bpd – more than current production, suggesting stocks will drop if output does not rise.