Ejiofor Alike with agency reports
Despite the global cuts in crude oil supply to the international market by the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members, crude oil prices yesterday dropped to seven-week low as production increases from key producers undermined the efforts of the cartel to reduce the glut in the oil market.
Crude prices have also fallen by about 15 per cent since May 25, when OPEC agreed to extend its output limits by six months until March 2018.
OPEC and its allies had promised to restrict output until at least the end of the first quarter of next year as part of the efforts to drain surplus supply.
Despite the deal, some OPEC members, including Nigeria and Libya, have been exempt from cutting and their rising output is seen to be undermining efforts led by Saudi Arabia.
While Saudi Arabia has reduced output, Nigeria and Libya are pumping more to the market.
Libyaâ€™s oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germanyâ€™s Wintershall, a Libyan source told Reuters.
Nigerian oil supply is also rising with exports of Bonny Light crude set to reach 226,000 bpd in August, up from 164,000 bpd in July, according to loading programmes.
OPECâ€™s pledge was to cut some 1.2 million bpd, while other producers including Russia agreed to bring the total reduction to almost 1.8 million bpd.
But production in the United States, which is not part of the deal, has jumped 10 per cent over the past year to 9.33 million bpd, effectively undermining efforts to curb global supply.
Reuters reported that oil prices fell to seven-month low yesterday after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and others to support the market through reduced output.
Global benchmark, Brent dropped $1.29 to a low of $45.62 a barrel, its weakest since November 15, 2016, exactly two weeks before OPEC and other producers agreed to cut output by 1.8 million bpd for six months from January.
It was later in the day, trading around $45.81, down $1.10, while the US crude fell $1.27 to $42.93, its lowest since November 14, before recovering to around $43.10.
Both benchmarks are down more than 15 per cent since late May, when OPEC, Russia and other producers extended limits on output until the end of March 2018.
OPEC supplies jumped in May as output recovered in Libya and Nigeria, both exempt from the production reduction agreement.
US oil production has been rising quickly this year, feeding the global glut. Data at the weekend showed a record 22nd consecutive week of increases in US oil drilling rigs.
However, Saudi Arabiaâ€™s Energy Minister, Khalid al-Falih said the oil market was heading in the right direction and just needed time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday.