Oil prices were not far off six-month lows, held down by an ongoing supply overhang that persists despite an OPEC-led effort to cut production and prop up crude markets. Brent crude futures were at $46.97 per barrel at 0436 GMT, only slightly above their last settlement. US West Texas Intermediate (WTI) crude futures were also up a notch at $44.48 per barrel. But prices for both benchmarks are still down by around 13 percent since late May, when producers led by the Organization of the Petroleum Exporting Countries (OPEC) extended a pledge to cut production by 1.8 million barrels per day (bpd) by an extra nine months until the end of the first quarter of 2018.
Rising U.S. oil output, particularly from shale drillers, is contributing to the ineffectiveness of the OPEC-led cuts. “Oil is unlikely to find solace into the weekend either, with tonight’s Baker Hughes Rig Count expected to deliver its now weekly increase of operational rigs,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore. U.S. investment bank Jefferies said the low prices were due to “a relentless build in the U.S. rig count, weekly builds in U.S. inventories, rising production in Nigeria and Libya, and weak compliance by key OPEC members Iraq and the UAE.”
High exports and production from Russia is also contributing to the ongoing glut. Top producer Russia, not an OPEC member but participating in the deal, is expected to export 61.2 million tonnes of oil via pipelines in the third quarter (around 5 million bpd), against 60.5 million tonnes in the second quarter, according to industry sources and Reuters calculations. Add in Russia’s tanker shipments and its total exports are likely more than 9 million bpd.
In the United States, which is not participating in any deal to hold back production, oil output <C-OUT-T-EIA> has risen more than 10 percent over the past year to 9.3 million bpd, and the Energy Information Administration (EIA) expects that figure to rise above 10 million bpd in 2018. In a sign of the continuing supply overhang, traders are again hiring oil tankers to store unsold crude while they wait for higher prices.