Oil prices fell down once again after bouncing back overnight in U.S. trading, falling to a fresh 1-month low following data showed a surprise build in U.S. crude stockpiles and the return of more Nigerian crude to an already oversupplied market.
The oil price has slipped below $50 a barrel despite a pledge by the world’s largest exporters to extend an existing output cut of 1.8 million barrels per day (bpd) into next year in an effort to cut down bulging global inventories.
The U.S. West Texas Intermediate crude July contract was at $45.45 a barrel by 8:2 AM EDT, down 24 cents, or 0.55%, after hitting its lowest since May 5 at $45.34.
Meanwhile, Brent Oil for August delivery on the ICE Futures Exchange in London plummeted 25 cents, or 0.54% to 47.81 a barrel. The global benchmark dropped to as low as $47.65 earlier in session, a level not seen since May 5.
Unexpected surge in U.S. crude stockpiles
Oil prices plunged to their lowest level in about a month on Wednesday after data showed that U.S. crude stockpiles unexpectedly climbed for the first time in nine weeks.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories increased by 3.3 million barrels in the week that ended on June 2, disappointing expectations for a crude-stock decline of 3.4 million barrels.
Gasoline inventories also increased by 3.3 million barrels. For distillate inventories including diesel, the EIA reported a rise of 4.4 million barrels.
Supply Gloom Caps Gains
Addition to concern about supply outstripping demand, Royal Dutch Shell on Wednesday lifted force majeure on exports of Nigeria’s Forcados crude, bringing all the country’s oil grades fully online for the first time in almost one and a half year.
The market has also come under pressure from news of rising output from Libya, which together with Nigeria is exempted from the production cut made by the Organization of the Petroleum Exporting Countries and its 11 partners.
“I’ve been quite bullish for the second half of this year, based on supply and demand balances and I would still not give up on that idea, that rebalancing is going to start in the second half,” said Tamas Varga, an oil strategist.
“But if Nigerian and Libyan production is picking up as well as they are now, then slowly, I am probably going to have to start changing my mind.”
Glut Concerns Weigh
Meanwhile, investors kept weighing the effect of diplomatic tensions between Qatar and other Middle Eastern nations, including Saudi Arabia, on an OPEC-led push to tighten up the market.
With oil production of about 620,000 barrels per day, Qatar’s crude production ranks as one of the smallest among OPEC producers, but tension within the cartel could deteriorate an agreement to hold back production in order to bolster prices.
Last month, OPEC and some non-OPEC producers extended a deal to cut 1.8 million barrels per day in supply until March 2018.
Concerns that the current rebound in U.S. shale production could upset efforts by other major producers to bring balance back to global oil supply and demand remained in focus.
Elsewhere On Nymex
Gasoline futures for July dropped down 0.7% to $1.491 a gallon, while July heating oil subtracted 0.2% to $1.413 a gallon. Natural gas futures for July delivery also dropped down 0.4% to $3.008 per million British thermal units, as traders anticipate the weekly storage data due later in the global day.
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