For the first time in the past month, oil prices went below $48 on the market’s growing doubts regarding the compliance with OPEC’s supposed deal to cut oil production by 1.8 million barrels.
Aside from the concern regarding OPEC members’ non-compliance with the deal last year to help normalize oil prices through production cuts, reports of a global supply in Libya raised concerns further regarding a global glut.
Analysts have taken note that Libya has been recently raising its production by adding as much as 250,000 barrels per day alarming investors as Libya’s production has recently been troubled due to fights between the militias and terrorist groups and the political unrest but is now set to reach political stability soon as the country reaches to achieve an agreement regarding setting up a power-sharing presidential council.
Although the deal last November has helped drive oil prices up, investors are still calling out for an extension of the agreement has the gains following the OPEC deal has recently been pared due to the rising U.S. crude stockpiles that led the markets to question the country’s role in oil production. The markets have then questioned to how the cuts are significantly affecting the effort to stop global glut supply and stabilize prices.
On Tuesday, oil prices dropped on reports of the weak compliance of the OPEC members on the output cut deal made back in November last year.
In the U.S. June WTI crude fell 2.4% or $1.18 settling at $47.66 per barrel on the New York Mercantile Exchange which is the lowest for the most-active contract since November 29.
Global oil market benchmark Brent futures, meanwhile, gained 47 cents or 0.9% to $50.93 per barrel on Wednesday on reports of the decline in US inventories.
U.S. crude stocks fell the previous week along with gasoline and distillate inventories according to data from the American Petroleum Institute.
According to the API, crude inventories fell by 4.2 million barrels in the week that ended last April 28. Analysts originally expected a cut of 2.3 million barrels.
The Energy Information Administration inventory is expected to be released by the US government on Wednesday.
Ongoing OPEC Cuts
While the markets are currently concerned with the extension of the OPEC deal as the current cuts have failed to make a lasting impression in the direction of oil prices, OPEC countries are still cutting daily production and has recently recorded the fourth straight decline in a month this April.
Reports have recently shown that Saudi Arabia is producing way below its target number whose efforts has been dampened due to the political unrest in Nigeria and Libya.