Oil prices fell about 2 percent on Tuesday, with Brent settling at seven-month lows and U.S. crude at its cheapest level since September, after increased supply from several key producers, notably Nigeria and Libya, overshadowed high compliance by OPEC and non-OPEC oil producers with a deal to cut global output.
Brent ended 89 cents lower at $46.02 a barrel, its lowest settlement since November15, two weeks before the Organization of the Petroleum Exporting Countries and other producers agreed to cut output by 1.8 million barrels per day (bpd) for six months from January.
OPEC and non-OPEC oil producers’ compliance with the deal to cut output reached its highest in May since they agreed on the curbs last year, reaching 106 percent last month, a source familiar with the matter said.
OPEC supplies, however, jumped in May as output recovered in Libya and Nigeria, both exempt from the production reduction agreement.
Libya’s oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germany’s Wintershall, a Libyan source told Reuters.
Nigerian oil supply is also rising. Exports of Nigeria’s Bonny Light crude are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading programmes show.
“The increasing August export programme in Nigeria and the jump in Libyan oil output should pressure oil prices further in the short term,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
“If we get bearish U.S. oil statistics this week, we could see a test of $45 on Brent,” Varga said.
The U.S. crude futures contract for July, which expired on Tuesday, settled down 97 cents at $43.23, the lowest since September 16.
Oil prices briefly reduced losses in post-settlement trade after the American Petroleum Institute, an industry group, said U.S. crude stockpiles had dropped more than forecast. Prices then gave up the gains.
Both benchmarks were down more than 15 percent since late May, when OPEC, Russia and other producers extended limits on output until the end of March 2018.
“Given the expectation that you’ll see higher production levels in several areas of the world, it’s going to offset all they are taking off the market,” said Gene McGillian, manager of market research at Tradition Energy.
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