Oil prices hit seven-month lows on global oversupply
LONDON (Reuters) — Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend which has undermined attempts by OPEC and other producers to support the market through reduced output.
Benchmark Brent dropped $1.29 to a low of $45.62/bbl, its weakest since Nov. 15, two weeks before OPEC and other producers agreed to cut output by 1.8 MMbpd for six months from January.
Brent was trading around $46.76, down $1.15, by 1205 GMT.
The US crude oil futures contract for July, which was due to expire later on Tuesday, fell $1.27 to a low of $42.93, its lowest since Nov. 14, before recovering to trade around $43.10.
Both benchmarks are down more than 15% since late May, when OPEC, Russia and other producers extended their limits on production until the end of March 2018.
"Recent data points are not encouraging," Morgan Stanley analysts said in a research note. "Identifiable oil inventories—both crude and product in the OECD, China and selected other non-OECD countries—increased at a rate of (about) 1 (MMbpd) in Q1."
OPEC supplies jumped in May as output recovered in Libya and Nigeria, two countries 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 oil are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading programs show.
"The increasing August export program 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 US oil statistics this week, we could see a test of $45 on Brent," Varga said.
US oil production has been rising quickly this year, feeding the global glut. Data on Friday showed a record 22nd consecutive week of increases in US oil drilling rigs.
But Saudi Energy Minister Khalid al-Falih said the oil market is heading in the right direction and just needs time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday.
Reporting by Christopher Johnson; Additional reporting by Aaron Sheldrick in Tokyo; editing by Jason Neely
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