Oil plumbs three-month low as OPEC reveals surprise Saudi production lift

The OPEC flag and the OPEC logo are seen before a news conference in Vienn

In an effort to dispel market concerns, the Saudi energy ministry said the "difference between what the market observes as production, and the actual supply levels in any given month, is due to operational factors that are influenced by storage adjustments and other month-to-month variables". Brazil is not a part of the non-Opec group that agreed to production cuts.

The uncertainty caused crude prices to fall on Tuesday, pushing losses suffered over the past week to more than 10%.

Oil prices traded within a tight band for the first two months of the year, as Opec and big producers such as Russian Federation curbed supplies as part of the production cut deal. The agreement took effect in January.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers cut production from January 1 to reduce record stocks of crude.

"So now we have some wavering on the Saudi side, which makes it a bit of a ideal storm right now ... for sentiment", Croft said.

That compared with analysts' expectations for an increase of 3.7-million barrels.

"The renewed weakness in oil prices is likely to put more pressure on OPEC members to agree to extend the output cuts beyond June", Tom Pugh, commodities economist at Capital Economics, wrote.

The Saudis have delivered the lion's share of cuts, while Iraq, Russia and some other producers have pumped above their quotas.

At the time of writing, Brent was trading 1.5 percent higher at $51.73 a barrel and WTI was up by 1.8 percent at $48.59 a barrel.

They were hoping for oil prices to stay above $50 this year - a level high enough to keep government coffers full, but low enough to discourage American shale producers from restarting their operations.

The oil price recovery was, however, under threat from fresh supply as high-cost producers in the United States started drilling again, encouraged by the price upswing, as well as from rising Canadian production.

The Organization for the Petroleum Exporting Countries (OPEC) released its monthly oil market report, in which Saudi Arabia disclosed that it had raised its oil output to 10.011 million barrels per day, an increase of 2.7 percent, during January.

The Crude Oil Volatility Index fell 9.4% to 30.1 on March 15, 2017. That will make life hard for producers hoping to eliminate the huge global supply glut that has built up in recent years.

Looking at the oil futures market, a key gauge of pent-up demand, OPEC said a record number of investors were placing wagers on price increases.

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