In its Monthly Oil Market Report for March, released Monday morning, the Organization of the Petroleum Exporting Countries (OPEC) noted that the cartel’s price for its reference basket rose by 8.4% ($2.22 per barrel), the first price increase in three months. OPEC coyly noted the positive sentiment in the oil markets “arising from the efforts of major producers to trim output” along with falling U.S. production and “healthy physical oil markets.”

Global demand growth for 2016 remained unchanged from last month’s report at around 1.25 million barrels per day, or a daily average of 94.23 million barrels. In 2015, demand growth averaged 1.54 million barrels a day for a daily average of 92.98 million barrels.

The cartel revised its estimate of non-OPEC supply growth for 2015 up by 100,000 barrels a day to 1.42 million barrels, or a daily average of 57.09 million barrels. For 2016 OPEC forecasts non-OPEC supply will drop by 700,000 barrels a day and average 56.39 million barrels a day for the year. The cartel said OPEC production in February, as reported by secondary sources, fell by 175,000 barrels a day to a daily average of 32.28 million barrels.

Demand for OPEC crude in 2015 was revised downward by 100,000 barrels a day to 29.7 million barrels. The cartel also lowered its estimate of 2016 demand for OPEC crude by 100,000 barrels a day to a new average of 31.5 million barrels a day.

Crude prices have risen sharply over the past two weeks, but when looking over these numbers it’s hard to see why. OPEC estimates its 2016 production will be 1.8 million barrels a day more than a year ago, when global inventories rose dramatically. How a decline in 700,000 barrels a day from non-OPEC producers offsets an OPEC gain of 1.8 million barrels and causes the price to rise is not something for which we have an explanation, except to say that either OPEC’s numbers are wrong or the market is wrong. The cartel noted:

A proposal for a production freeze at January’s level by major oil exporters, and more news about an additional oil producer meeting in March, as well as further layoffs by service companies and related reports about a complete halt of fracking activities by some companies, all lent support to the market.

In February OPEC production of 32.28 million barrels a day was 780,000 barrels more than OPEC’s forecast for demand on its members’ production. Even if global production falls by the cartel’s estimated 700,000 barrels a day, demand still trails supply. That is not a formula for higher prices.

We noted in our Saturday report on U.S. rig counts that speculators (hedge funds and other managed money traders) have been bailing out of their short positions for the past few weeks. Given these latest OPEC projections, we could see some movement back into speculative short bets on oil.

Benchmark West Texas Intermediate (WTI) for April delivery traded down more than 4% Monday morning at $36.88. Brent for May delivery traded down nearly 3% at $39.24.

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