Oil prices fell to a three-week low on Wednesday with Brent set for its fifth monthly loss despite OPEC-led output cuts to reduce a global glut to try shore up prices.
Output from the Organization of the Petroleum Exporting Countries (OPEC) rose in May, the first monthly increase this year, a Reuters survey found, as higher supply from two OPEC states exempt from a production-cutting deal, Nigeria and Libya, offset improved compliance with the accord by others.
OPEC and other producers, including Russia, agreed last week to extend a deal to cut production by about 1.8 million barrels per day (bpd) from January to June until the end of March 2018.
“Traders covered short positions ahead of OPEC and some of these have now been re-established,” said Ole Hansen, head of commodities strategy at Saxo Bank.
Brent crude futures for July were down $1.61, or 3.1 percent, at $50.23 a barrel by 2:09 p.m. EDT (1809 GMT) after falling as low as $49.81 on their last day as the front-month.
U.S. West Texas Intermediate crude was down $1.30, or 2.6 percent, at $48.36 per barrel, after falling as low as $47.73.
At their session lows, Brent hit its lowest since May 9, while WTI was its lowest since May 12. That narrowed the premium of the Brent front-month over the same U.S. month <WTCLc1-LCOc1> to its lowest in almost five weeks.
Brent was down almost 3 percent, putting it on track for a fifth monthly loss in a row, while U.S. was down about 2 percent, heading for a third monthly decline.
Libya’s oil production has risen to 827,000 bpd, climbing above a three-year peak of 800,000 bpd reached earlier in May, the National Oil Corporation said, after a technical issue that hit Sharara oilfield was resolved.
Shipping data on Thomson Reuters Eikon shows that, excluding pipeline exports, Libya shipped an average of 500,000 bpd of oil so far this year, compared with 300,000 bpd average for 2016.
Compliance by those signed up to the OPEC-led deal remained high among OPEC members and industry sources said Russian figures for May showed output in line with its pledge.
Saudi Arabia and Russia said that cooperation between OPEC and non-OPEC producers was seen lasting beyond March as they were committed to bringing global oil inventories down to the industry’s five-year average.U.S. crude stocks were forecast to have fallen 2.5 million barrels last week, their eighth straight weekly decline since hitting a record high at the end of March.
“Attention will be on U.S. inventory stocks tomorrow, with expectations of a further draw this week, following initial indications of strong demand for gasoline after the AAA said that driving mileage over the holiday weekend was the highest since 2005,” said analysts at Cenkos Securities.
The American Petroleum Institute (API) is scheduled to release its data at 4:30 p.m. EDT (2030 GMT) on Wednesday, and the U.S. Energy Information Administration (EIA) report is due at 11:00 a.m. EDT (1500 GMT) on Thursday, both delayed a day because of a holiday on Monday.
(Reporting by Scott DiSavino; Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Keith Weir)