Due to pressure from high global inventories and doubts about OPEC’s ability to implement agreed production cuts, oil prices dropped to six-week lows on Thursday. Brent crude oil fell 30 cents to $46.70 a barrel, its weakest since May 5 and just above six-month lows.
It, however, recovered a little to trade around $46.90, according to Reuters.
United States’ light crude was down 25 cents at $44.48, also not far off six-month lows, the news agency added.
Both crude benchmarks have lost all the gains made at the end of last year after the Organization of the Petroleum Exporting Countries, OPEC agreed with other big producers to cut output in an effort to prop up prices.
OPEC and its allies have promised to restrict output until at least the end of the first quarter of next year to try to drain surplus supply.
But inventories are near record highs in many parts of the world, and many traders expect further price falls.
Crude prices have fallen about 12 per cent since May 25, when OPEC agreed to extend its output limits into next year.
In spite of the deal, some OPEC members, including Nigeria and Libya, were exempted from cutting and their rising output is seen to be undermining efforts led by Saudi Arabia.
OPEC’s pledge was to cut some 1.2 million bpd, while other producers including
Russia agreed to bring the total reduction to almost 1.8 million bpd.
But production in the United States, which is not part of the deal, has jumped 10 percent over the past year to 9.33 million bpd.
“Production growth in Libya and Nigeria and continued rig additions in the U.S. are complicating the picture, raising doubts on OPEC’s strategy,” AB Bernstein told Reuters.
OPEC expects U.S. production to increase by 800,000 bpd in 2017, raising possibilities of persistent global oversupply.