Supply glut undermines oil price rebound: Opec

A recovery in oil prices which began in February is not justified by fundamentals as there remains a supply glut in the market, oil cartel Opec says in its monthly report.

Crude prices rallied about 20 per cent in February, ending a losing streak lasting about eight months during which prices collapsed by 60 per cent.

But the Organisation of the Petroleum Exporting Countries (Opec) warned that prices picked up even though there was still an oversupply of almost one million barrels a day on the market.

"ICE Brent and Nymex WTI crude oil futures defied fundamentals and moved up sharply, posting their first gains since June 2014 after seven months of a declining streak that ended with values down by almost 60 per cent," said the cartel in its report.

This is "despite the fact that global supply continued to exceed demand", Opec said, as it left its demand forecast unchanged at 92.4 million barrels a day for 2015.

The 12-nation Opec also commented on major oil producer Russia, which is not a member of the cartel. It noted the "big challenge" Russia is facing from slumping oil prices and Western sanctions over Ukraine, which could see it lose US$135 billion ($183 billion) in 2015.

Russia "faces a big challenge due to sanctions, devaluation of the ruble and an oil price drop in 2015 ... if the oil price stays at the current US$55 per barrel for a year, Russia will earn around US$135 billion less in 2015 than in 2014 assuming US$100 per barrel for that year - equivalent to around 10 per cent of its gross domestic product."

Opec's assessment of the global oil market came after the International Energy Agency issued a similar reading on Saturday.

The IEA's warning that the rebound in oil prices is built on flimsy foundations sent crude prices sliding.

Oil prices extended their losses yesterday, with the US benchmark West Texas Intermediate for April delivery dipping as low as US$43.57 a barrel before closing US96c lower at US$43.88, while Brent North Sea crude for April fell US$1.23 to US$53.44 a barrel.AFP