Organization of Petroleum Exporting Countries OPEC Wednesday said its oil output rose in April for the first time since July 2008, despite worsening prospects for global oil demand this year, rising inventories and risks of a fresh fall in crude prices.
The output data, based on secondary sources but used as reference by OPEC, indicate many members are struggling to comply with the 4.2 million barrels a day of cuts decided last year. That makes them likely to decide against any new formal reduction decision at the group's next meeting set for May 28.
OPEC said output by its 11 quota-bound members had risen by 224,300 barrels a day in April compared with March. That means compliance to agreed cuts have actually fallen to 77% in April from 82%, far from the organization's target of 95%.
Many countries have faced difficulty in cutting their production as their budgets are already under pressure from lower oil prices.
Angola, which holds OPEC's presidency, Venezuela and Iran account for more than half of the output increase. But the three countries say they are complying with the cuts agreed and that claims of overproduction stem from miscalculations by the OPEC Secretariat and inaccurate secondary sources.
Saudi Arabia, OPEC's largest producer, has also started to increase output again, though it remains under its quota of 8.051 million barrels a day.
Part of the increase may be driven by rising demand in March for China, to which Saudi Arabia was the largest supplier with a 15.2% market share and Angola the second with 14.1%.
OPEC countries have also complained they are bearing the brunt of the cuts while nonmembers who have vowed to contribute to its efforts are getting a free ride. Russia, which has told the organization it may cut output by 320,000 barrels a day, will reduce output by 100,000 barrels a day in 2009, the OPEC report said. The number was a result of an upward revision by 26,000 barrel a day, tied to higher-than-expected numbers both in current production and planned exports.
In its monthly report for April, OPEC once more downgraded its forecast for world oil demand in 2009 by 200,000 barrels a day, with demand now expected to fall by 1.6 million barrels a day due to the continued deterioration of the world economy.
Most of the decline comes from members of the Organization for Economic Cooperation and Development it said. "Although some recent data implies that the U.S. economic depression is bottoming out and decline in industrial production has reached the bottom, the country's April oil demand lost more than 1.5 [million barrels a day year-on-year] pushing total world oil demand growth to a record low of -2.7 [million barrels a day year-on-year]," OPEC said.
By contrast, non-OECD growth is expected to remain roughly flat as developing nations such as China barely increase their consumption for the year, it said.
In addition, OPEC said "the preliminary data indicates OECD commercial oil inventories remain very high, corresponding to around 61 days of forward cover in April."
OPEC has said it wants to bring the number back to a five-year average of 52 days.
Despite data showing mounting oversupply and a stock buildup, oil prices rose back to a six-month high Tuesday of $60 a barrel.
"Considerable risks remain as oil market fundamentals are far from balanced due to the persistent contraction in demand and growing supply overhang," the report added.