Analysts also said a steady rise in United States crude production has also fed the global crude glut.
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U.S. crude supplies probably climbed 2.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
Although the move was aimed at reducing global oversupply, it has been followed by a mini collapse in oil prices, with Brent trading at below $50 a barrel in recent weeks, hitting a 2017 low of under $47 on 15 June.
OPEC crude oil output rose 290,000 b/d in May to 32.08 million b/d-the highest level so far this year-after comebacks in Libya and Nigeria, which are exempt from supply cuts. Official data from the Energy Information Administration will be released Wednesday, amid forecasts for an oil-stock drop of around 2.2 million barrels.
Oil prices were unable to sustain gains seen in Europe on Monday with selling interest above $45.0 p/b in WTI and a drift towards $44.50.
Traders said that the main factor driving the low prices was a steady rise in USA production undermining the OPEC-led effort to tighten the market.
Oil slumped to the lowest close in seven months on Thursday amid concerns that rising U.S. supplies will offset output cuts by the Organisation of the Petroleum Exporting Countries and allies including Russian Federation. The contract gained 28 cents to US$44.74 on Friday.
The oil stock is high, higher than what it was when the oil organization had started its production cuts and supplies. “Identifiable oil inventories-both crude and product in the OECD, China and selected other non-OECD countries-increased at a rate of [about] 1 [million bbl/d] in first quarter”. That means it’s set to enter a bear market, which kicks in when settlement prices fall 20 percent from their peak. OPEC’s efforts are being undermined by its own members, some of whom have exemptions, and rising production in other countries, notably from shale-drillers in the U.S. At the end of May, OPEC agreed to extend the cuts for an additional nine months. The increased drilling activity led Rystad Energy to recently predict that monthly US oil production could hit a new record before the end of the year. Saudi Arabia, Kuwait, Qatar, Algeria and Venezuela met counterparts from non-Opec nations Russian Federation and Oman in Vienna to find a way to verify that the 24 signatories to their December 10 accord are fulfilling pledges to remove a combined 1.8 million barrels a day for six months.
More worrying is the overall global demand-supply situation.
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Still, Saudi Energy Minister Khalid al-Falih remained confident OPEC’s cuts were working. Supply growth in 2018 could contribute to downward pressure in oil prices as early as late 2017.
