The supply of oil from the Organization of Petroleum-Exporting Countries (OPEC) reached its the highest level since August 2012 in May, according to the latest oil market report from the International Energy Agency (IEA).
OPEC supply in May edged up to 31.33 million barrels a day (mb/d), according to the IEA, with Saudi Arabia, Iraq and the United Arab Emirates pumping at record monthly rates to keep output 1 mb/d above OPEC's official supply target for a third month running.
OPEC oil ministers decided last week to maintain their official production ceiling of 30 mb/d, saying that the global economic recovery and growing oil demand justified maintaining high production levels.
OPEC recorded in its own monthly report, published Wednesday, that total output in May was 30.9 mb/d and an increase in production in several member countries, with the highest increase in production in Iraq and UAE. Saudi Arabia had the largest output in May of 10.1 mb/d.
There were hopes that the group, which is dominated by major oil producer Saudi Arabia, could cut production in a bid to support oil prices, which have declined from around $114 a barrel last year to currently trade around $65 a barrel for benchmark Brent crude.
The move has been seen widely as part of a strategy for OPEC to maintain market share and put pressure on its U.S. rival shale oil producers.
The strategy appears to be working, with the IEA noting that the U.S oil rig count has now fallen for 26 consecutive weeks through the week ending 5 June and that quarterly reports posted by major U.S. shale drillers show how the drop in oil prices hit earnings in the first quarter of 2015.
The IEA remarked that "however remarkable the drop in the rig count may seem in its rapidity and scale, totaling nearly 60 percent since its October peak, recent improvements in drilling efficiency and productivity in key output areas are no less noteworthy."
The U.S. is not alone in seeing supplies falling – particularly as demand is slow to pick up. But while global oil supplies fell by 155,000 barrels a day in May to 96 million barrels a day on lower non-OPEC output, the IEA said, supplies remained "at a steep" three million barrels a day above the same period last year. The IEA also forecast non-OPEC supply growth to increase by 1 million barrels a day in 2015.
It also revised up its estimate of global demand growth to 1.7 mb/d for the first quarter of 2015 and 1.4 mb/d for 2015 as a whole. Sounding a note of caution, it added that "momentum is expected to ease somewhat in the second half of 2015, assuming a return to normal weather conditions and given a recent partial recovery in oil prices."
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.