Oil prices decline amid new glut fears

U.S. oil prices dove on Wednesday, dropping more than 4 percent as traders killed a dramatic rally amid renewed fears the oil glut isn’t going away.

U.S. oil prices dove on Wednesday, dropping more than 4 percent as traders killed a dramatic rally amid renewed fears that the oil glut isn’t going away.

Prices fell amid reports that OPEC shipped more oil to buyers last month while oil production surged in Libya and Nigeria, where militias that had previously disrupted crude supplies have loosened their grip on damaged oil fields and terminals.

Recent developments have stabilized conflicts that had crimped Libya’s crude production for years. Armed factions in Nigeria appear to have left the oil fields behind. That has unleashed a surge of oil at a time when OPEC, Russia and others are trying to shrink the oversupply by keeping 1.8 million barrels a day off the market.

If the peace continues, the two African nations — together with U.S. shale drillers — could boost their combined oil production by 1.6 million barrels a day, off-

setting about 90 percent of OPEC’s cuts by year’s end, according to the energy consultancy Rapidan Group.

“At what point does it become clear OPEC isn’t doing enough?” asked Fernando Ferreira, an energy policy analyst at Rapidan Group in Maryland.

U.S. oil prices dropped $1.94, or 4.1 percent, to $45.13 a barrel on Wednesday, snapping an eightsession winning streak, the longest rally in five years. That bull run had lifted prices from $42.53 a barrel late last month — the lowest point of the year — to $47.07 a barrel Monday, as traders cheered last week’s decline in U.S. oil inventories and the first drop in the U.S. rig count since January.

But the market changed its tune when Reuters data showed that OPEC’s exports rose about 2 percent to almost 26 million barrels a day last month, and that output in Libya and Nigeria climbed by 130,000 barrels a day the same month, according to a survey by Bloomberg.

Libya’s output has recently climbed to more than 1 million barrels a day, and Nigeria produced some 1.7 million barrels a day, up nearly a third from earlier this year.

Rapidan says Libya and Nigeria together could raise production by another 300,000 barrels a day by the fourth quarter as state-run companies repair damaged oil wells and restore failing power plants that supply the electricity to pump crude. Rapidan also projects that U.S. oil production could rise by another 530,000 barrels a day by year’s end.

Analysts said OPEC may soon have to decide whether to deepen its oil production cuts to accommodate rising output from the two beleaguered nations to support prices. Russian officials reportedly said they opposed cutting output further.