Oil dropped the most in two weeks as a report that OPEC’s supply this month would be the highest this year fueled worries over a global glut.
Futures on Friday tumbled 2.5 percent in New York, erasing gains from earlier in the week.
Supply from OPEC is set to exceed 33 million barrels per day this month, as members including Saudi Arabia and Nigeria increase shipments, according to tanker tracker Petro-Logistics SA.
This calls into question the effectiveness of OPEC’s deal to reduce output and help rebalance the market as producers gather in Saint Petersburg, Russia.
“To really see the market push much higher, we need to see a drumbeat that inventory levels are being pared, like the main producers who are cutting production say is happening,” Stamford, Connecticut-based Tradition Energy market research manager Gene McGillian said by telephone.
Without that, “further gains are going to be kind of tough to come by,” he added.
Oil’s fleeting rallies have been held back by concerns that growing output in the US, Libya and Nigeria is offsetting other producers’ curbs, slowing the effort to shrink stockpiles.
Earlier in the week, government data showed US crude production rose to the highest level since July 2015 and OPEC member Ecuador said it would increase its production by year-end in order to raise revenue.
Something needs to be done about rising output from Libya and Nigeria, or there will be “lower prices, because US production is still anticipated to increase,” London, Arkansas-based energy research firm WTRG Economics economist James Williams said by telephone.
West Texas Intermediate for September delivery on Friday declined US$1.15 to settle at US$45.77 per barrel on the New York Mercantile Exchange, the lowest level in more than a week. Total volume traded was about 14 percent less than the 100-day average.
Futures have hit a wall every time they approached US$48 this month.
Brent for September settlement fell US$1.24 to end the session at US$48.06 per barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of US$2.29 to West Texas Intermediate.
Several OPEC nations, plus some nonmembers, are to meet in Saint Petersburg to discuss the progress of the agreement to trim output.
Libya and Nigeria, which have boosted oil production since they were exempt from the deal, might be asked to cap their crude output, Kuwaiti Minister of Oil Essam al-Marzooq has said.
Meanwhile, government data earlier in the week showed US crude stockpiles slid for a third week to the lowest level since January, and gasoline supplies fell by the most since March.
“Before this week’s report from the EIA [US Energy Information Administration], a lot of folks were thinking that there was a decent probability that Russia and Saudi Arabia might announce a little cut to compensate for Nigeria and Libya,” Williams said. “But with three weeks of big drawdowns, they might have enough confidence that everything’s working and not do that. That would take a little bit of the bloom off the rose.”
The number of US oil rigs this week dropped by one to 764, Baker Hughes Inc data showed.
US crude imports from Saudi Arabia are set to fall to 847,000 barrels per day this month, compared with 968,000 barrels per day last month, according to estimates from cargo tracking company Kpler.
US fuel oil demand is set to peak next month, further pressuring inventories after the nation’s refiners cut yields and the halt of Mexico’s Salina Cruz reduced supply, JBC Energy said in a note.
In other energy trading, wholesale gasoline fell US$0.04 to US$1.56 per gallon, heating oil lost US$0.03 to US$1.52 per gallon and natural gas slid US$0.07 to US$2.97 per 1,000 cubic feet.
In other commodities, gold added US$9.40 to US$1,254.90 per ounce, its first back-to-back weekly advance sine June 2.
Silver rose US$0.11 to US$16.46 per ounce and copper picked up US$0.01 to US$2.72 per pound.
Additional reporting by AP
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