Oil prices fell on Tuesday to a fresh low for the year as the market focused on growing supplies despite drastic output cuts from some of the world’s biggest producers.
Brent crude, the international benchmark, fell $1.06 cents to $45.84 a barrel. West Texas Intermediate, the US marker, dropped by 98 cents to a low of $43.22 a barrel. Both benchmarks fell to the lowest since November.
Prices have erased all of their gains since Opec and other producer countries agreed late last year to cut output by 1.8m barrels a day for the first six months of the year. A decision made in May to extend the deal for a further nine months has failed to bolster prices.
Saudi Arabia’s energy minister Khalid Al Falih this week said the oil market correction was taking place, although it would still take time for the cuts to take effect.
Rising output from Libya and Nigeria, which were exempt from the deal due to conflict in both countries, have offset cutbacks from their Opec peers.
Libya has said is set to reach its 1m b/d target in the coming weeks after an interim agreement with an oil operator, while Nigerian exports are forecast to rise. Mr Falih said he did not see rising production from these countries as a threat to the deal.
“The future might be bright for oil prices but the present is not,” said Tamas Varga at London-based broker PVM.”Fresh supply-side developments make any immediate price recovery a wishful thinking.”
Rising US crude production, despite the fall in prices, has not helped sentiment. Data on Friday showed a rise in the number of rigs drilling for oil – the 22nd consecutive weekly increase.