Al-Khobar – Oil prices fell after OPEC’s monthly report stated that Saudi Arabia increased its February output by 263,000 barrels per day to 10 million bpd, but the prices soon rose again after a source explained that the increase was not intended for the international market.
On Tuesday, oil fell to three-month lows after the Organization of the Petroleum Exporting Countries reported that crude inventories in developed countries had risen above the five-year average, despite production cuts by some of the world’s largest exporters.
Saudi Arabia’s announcement of increased production, though still within limits of the agreement within OPEC, also contributed to the price decline.
The market also responded to Kuwait’s announcement that it would support an extension of the global deal.
Kuwait’s oil minister Essam al-Marzouq warned the parliament that the prices could reach $45.
“It will speed up rebalancing of the market and will help bring prices to acceptable levels for oil-producing nations and the industry in general,” he said.
OPEC, which reduced its output even more than it had pledged last year, also said that US shale output and other non-OPEC supply was increasing.
By noon on Tuesday, Brent was down by 67 cents at $50.68 a barrel, lowest since November 30, after earlier touching $50.55.
US crude also fell 82 cents to $47.58 a barrel after dropping during the session to $47.47.
Oil prices have now reversed almost all the gains notched up since OPEC said on November 30 that it was cutting output.
OPEC secondary sources said Saudi output fell to 9.797 million bpd in February, while Saudi Arabia reported to OPEC that it increased production to 10.011 million bpd.
OPEC uses two sets of data to monitor output which are figures provided by each country and by secondary sources, which include media involved with the oil sector.
An informed source told Bloomberg that Saudi Arabia is committed to its agreement with OPEC.
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.”
OPEC said in the report that oil stocks in industrialized nations rose in January to stand 278 million barrels above the five-year average, of which the surplus in crude was 209 million barrels and the rest refined products.
“Despite the supply adjustment, stocks have continued to rise, not just in the US, but also in Europe. Nevertheless, prices have undoubtedly been provided a floor by the production accords,” OPEC said.
After the release of the report, oil prices fell close to $50 a barrel, the lowest since November.
In the report, OPEC pointed out that there is an increase in members’ compliance with the deal.
Based on the agreement, supply from OPEC members with production targets fell to 29.681 million bpd last month.
Russian Economic Development Minister Maxim Oreshkin said that the resiliency of US shale to lower crude oil prices was putting a ceiling on the price of oil.
“The reasons for decline of oil prices include several factors — quite aggressive production growth in the United States, and rumors associated with a possible change of OPEC tactics,” he said.
Oreshkin stressed that Russia didn’t expect the prices to remain at $55 per barrel for this long.