Well, so much for OPEC's production cut.

In OPEC's latest Monthly Oil Market Report, the oil producing cartel reported that in May - the same month OPEC met to extend its production cuts - crude output climbed the most in six months, since November 2016, rising by 336.1kb/d to 31.139 mmb/d, the highest monthly production of 2017, as members exempt from the original Vienna deal restored lost supply.

From the report:

Preliminary data indicates that global oil supply increased by 0.13 mb/d in May to average 95.74 mb/d, m-o-m. It also showed an increase of 1.48 mb/d, y-o-y. A decrease in non-OPEC supply, including OPEC NGLs represents a contraction of 0.21 mb/d m-o-m but an increase of 0.34 mb/d in OPEC crude oil production, not only offset the decline of non-OPEC supply but also increased overall global oil output in May. The share of OPEC crude oil in total global production stood at 33.6% in May, an increase of 0.3% from the month before. Estimates are based on preliminary data for non-OPEC supply, directcommunication for OPEC NGLs and non-conventional liquids, and secondary sources for OPEC crude oil production

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Specifically, Libya pumped 730k b/d in May, up 178kb/d from 552kb/d in April; Nigeria output jumped to 1.68m b/d vs 1.506m b/d, a 174kb/d increase, while even the biggest producer Saudi Arabia, saw its output grow by 2.3kb/d to 9.94mb/d vs 9.938m b/d in April. 

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Not surprisingly, in an attempt to preserve the "reduction" narrative, in its self-reported figures, Saudi Arabia told OPEC via direct communication that it produced 9.88mb/d in May, down 66.2kb/d from April's 9.946mb/d, although these figures are looking increasingly suspect.

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Perpetuating its existence of forced self-delusion, OPEC predicted that surplus oil inventories would continue to decline in 2H 2017 as their cuts (what cuts) take effect and demand picks up. “The re-balancing of the market is underway,all time” OPEC wrote, conceding that it is taking place "at a slower pace" and adding that “the decline seen in the overhang” in developed-nation stockpiles “is expected to continue in the second half, supported by production adjustments by OPEC and participating non-OPEC producers." There was little discussion of the soaring US shale output, which as we wrote last night is expected toall-timehigh next month.

From the monthly report:

Additionally, OPEC lowered forecasts for Russia production in 2H by 200k b/d, while the overall outlook for non-OPEC supply in 2H was reduced by 200k b/d, vs pledge of total reduction of ~558k b/d. The surplus in oil inventories in developed nations relative to their five-year average -- OPEC’s main measure of the overhang -- is down to 251m bbl from 339m at end-2016.

The report kept 2017 global oil demand growth forecast unchanged from previous month’s estimate at 1.27m b/d y/y, while it cut full year non-OPEC supply growth estimate to 840k b/d y/y, a downward revision of 110k b/d.Which is, of course, wrong if Goldman's forecast for shale production is even remotely accurate.

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