Crude oil holds near 7-month lows on global oversupply

Oil prices steadied just above seven-month lows on Tuesday after news of increases in supply, a trend which has undermined the attempts by OPEC and other producers to support the market through reduced output.

Benchmark Brent was up 15 cents at $47.06 by 0820 GMT. On Monday, it fell 46 cents, or 1 per cent, to settle at $46.91 a barrel.

That was its lowest close since November 29, the day before the Organization of the Petroleum Exporting Countries and other producers agreed to cut output by 1.8 million barrels per day (bpd) for six months from January.

US crude oil was 15 cents higher at $44.35 a barrel. It fell 54 cents on Monday to $44.20, its lowest close since November 14.

Both benchmarks are down by around 15 per cent since late May, when OPEC, Russia and other producers extended their limits on production until the end of March 2018.

“Recent data points are not encouraging,” Morgan Stanley analysts said in a research note. “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 bpd) in Q1.”

OPEC supplies jumped in May as output recovered in Libya and Nigeria, two countries 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, industry figures show. Exports of Nigeria’s benchmark Bonny Light crude oil are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading programmes show.

“The increasing August export programme 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,” Varga said.

US oil production has been rising quickly this year, feeding the global glut. Data on Friday showed a record 22nd consecutive week of increases in US oil drilling rigs.

But Saudi Energy Minister Khalid al-Falih said the oil market is heading in the right direction and just needs time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday.