Oil settles at multi-month lows on persistent glut

NEW YORK — Oil fell about 2% on Tuesday, with Brent settling at seven-month lows and US crude at its cheapest level since September, after increased supply from several key producers overshadowed high compliance by the Organization of the Petroleum Exporting Countries (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 Nov. 15, two weeks before OPEC and other producers agreed to cut output by 1.80 million barrels per day ( bpd) for six months from January.

The US crude futures contract for July, due to expire later on Tuesday, settled down 97 cents at $43.23, the lowest since Sept. 16.

Oil prices briefly pared losses in post-settlement trade after the American Petroleum Institute, an industry group, said US crude stockpiles had dropped more than forecast. Prices then gave up the gains.

Both benchmarks were down more than 15% 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’re taking off the market,” said Gene McGillian, manager of market research at Tradition Energy.

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% 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 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.”

Ahead of weekly US inventory reports, US crude oil stocks were forecast to have fallen 2.10 million barrels last week, while gasoline was seen building by 400,000 barrels after last week’s data showed an unexpected build that weighed heavily on the market. —