In its Monthly Oil Market Report for March, released Tuesday morning, the Organization of the Petroleum Exporting Countries (OPEC) noted that the cartel’s price for its reference basket rose to $53.37 a barrel (up about 2%) last month. This is the third consecutive monthly rise in the basket price following the agreement between OPEC and non-OPEC producers to curtail output by about 1.8 million barrels a day through June of this year.
Global demand growth for 2016 was revised upward by 50,000 barrels a day to 1.38 million barrels per day or a daily average of 95.05 million barrels. The cartel’s projected demand growth for 2017 remained rose by 70,000 barrels a day to 1.26 million barrels a day to average 96.31 million barrels.
The cartel raised its estimate of non-OPEC production for 2017, forecasting non-OPEC supply to increase by 40,000 barrels a day and average 57.74 million barrels a day for the year.
The cartel said OPEC production in February, as reported by secondary sources, fell by 140,000 barrels a day to a daily average of 31.96 million barrels. Saudi Arabia’s February production rose back above 10 million barrels a day, about 263,000 daily barrels above the reported January total.
The cartel reiterated its estimate of 2016 demand for OPEC crude at 31.6 million barrels a day, up 1.9 million barrels a day compared with 2015. The cartel now forecasts the demand for OPEC crude at 32.4 million barrels a day in 2017, up by 300,000 barrels since the previous monthly report.
On Monday the U.S. Energy Information Administration (EIA) issued its Drilling Productivity Report for March. The agency expects April crude oil production from seven major onshore shale plays to rise by 109,000 barrels a day to 4.96 million barrels a day. The number of drilled but uncompleted wells rose by 91 month over month in February to 5,443.
OPEC production dropped by about 140,000 barrels a day in February while U.S. production rose by nearly 90,000 barrels a day. The implication is that the agreed production cuts from OPEC and non-OPEC producers are going to have to be extended beyond the agreed June end date. But the longer it takes the cuts to rebalance the market, the more difficult it becomes because U.S. shale producers have begun ramping production and there is almost certainly more on the way.
Crude prices were falling again Tuesday, with West Texas Intermediate for April delivery trading down nearly 2% at $47.45. Brent crude for May delivery traded down about 1.6% at $50.54. The rise in Saudi production in February was the news Tuesday, but growing inventories and more slack due to increases in U.S. production continue to worry oil traders.