OPEC Exacerbates Global Oil Glut with Near Record High Output

A day after concerns were expressed that the current oil price rally would be short-lived due to increases in global stockpiles, the Organization of the Petroleum Exporting Countries' (OPEC) output still looks to be near record levels.

Reuters data suggests supply rose to 32.64 million barrels per day (bpd) in April, compared to the 32.65 million bpd produced in January of this year, the highest output in Reuters survey records which began in 1997.

In its bid to return output to pre-sanction levels, Iran was responsible for posting the sharpest increase in production and is just .10 million bpd shy of reaching the daily rate of 3.50 million barrels it posted in 2011.

Southern exports from Iraq have risen to what may be a new April record, and the third largest supply increase came from the United Arab Emirates, following the end of oilfields maintenance work.

Saudi Arabia's output remained steady at 10.15 million bpd (although sources say this figure will soon climb to 10.50 million bpd as buyers are found for oil-filled Saudi tankers floating at sea), and production in Nigeria, Kuwait, and Venezuela declined due to strikes, pipeline repairs, and loading problems.

Reuters reports that OPEC officials are encouraged by the price rally and that this may spell trouble for any positive outcome when the cartel meets on June 2 in Vienna to once more discuss freezing production; meanwhile, Eugen Weinberg, analyst at Commerzbank, echoed the sentiments of many colleagues by stating, "The market is massively oversupplied.

"This rally doesn't have strong legs."

To which Hamza Khan, senior commodity strategist at ING, added: "The issue is that we haven't seen price rallies ... correlate with fundamentals; the fundamentals - high stocks, high production - haven't changed." 

Last week, the Wall Street Journal pointed out that the banks it surveyed in 2015 predicting that Brent would exceed $70 per barrel in 2016 are now stating it won't hit that mark until 2018 - which indicates that a true market recovery is still well into the future.