Global oil benchmark, Brent crude, struck a five-month low on Thursday as the United States’ crude inventories showed a lower-than-expected decline amid growing compliance with a deal to limit production by the Organisation of Petroleum Exporting Countries (OPEC) and other producers.
Brent, against which half of the world’s oil is priced, fell by $2.32 to $48.47 per barrel on Thursday as of 7:00pm Nigerian time, its lowest level since late November 2016.
The US West Texas Intermediate benchmark dipped below $46 per barrel for the first time since late November.
The concern over rising global supply and stubbornly high inventories effectively wiped out most of the gains made since OPEC announced its first supply cut in eight years.
OPEC on November 30, 2016 agreed on its first limit on oil output since 2008, a deal supported by some non-OPEC members, including Russia and Oman. They announced output cuts of 1.8 million barrels per day for the first six months of 2017.
The cuts in production resulted in a significant rally in oil prices, with Brent trading as high as $56 per barrel in February.
Data from the Energy Information Administration released on Wednesday showed that US crude output jumped to 9.29 million bpd, the highest since August 2015. But crude inventories fell by 930,000 bpd in the week to April 28, against analysts’ expectations for a decrease of 2.3 million barrels.
OPEC began production cuts on January 1 in a bid to reduce swollen global inventories and bolster the price of oil, which is still stuck at half its 2014 level. Total output, including Libya and Nigeria, remains 135,000 bpd above target, putting the group about 90 per cent of the way toward its goal.
Among the 10 members bound by the caps, compliance strengthened to 102 per cent from 89 per cent in March, a Bloomberg News survey of analysts, oil companies and ship-tracking data showed on Wednesday.
OPEC will meet again in Vienna, Austria, on May 25 to decide whether to extend its six-month production cut through the second half of the year.
Reuters on Thursday quoted three delegates as saying that OPEC and non-OPEC oil producers looked likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, downplaying the chance of additional steps such as a bigger cut.