Crude oil started the week with a loss, which may be extended today as U.S. shale drillers continue to add rigs, and Libya and Nigeria ramp up production, undermining their fellow OPEC members’ efforts to reduce output and support prices. Oil prices are now at a 7-month low.
Oil prices were pressured when last Friday, Baker Hughes reported the 22nd week in a row that US drillers have added rigs – a record-long streak despite prices falling by 15 percent since late May, when OPEC and Russia announced the extension of their oil output cut deal.
An addition blow came on Libya’s announcement that its crude oil production has hit 885,000 bpd after the National Oil Corporation struck an interim agreement with German Wintershall, which led to the unblocking of some 160,000 bpd in daily production, shuttered during a dispute between the two. Indifferent to OPEC’s efforts to curb the glut to push up prices, Libya is eager to raise its production as quickly as possible, eyeing 1 million bpd by the end of July.
Meanwhile, cargo tracking updates from energy data provider Kpler revealed that global crude oil floating storage had hit the highest level since the start of 2017, at an average of 102 million barrels over the ten-day period to June 16. The amount of crude in floating storage increased the most in the North Sea by some 32 percent, in Singapore by 23 percent, and in Iran by around 16 percent.
An additional factor driving prices down this week is the expiry of the July futures for West Texas Intermediate today, according to Reuters, as last Friday saw 70,000 contracts outstanding. This means 70 million barrels of WTI would have to go into the Cushing storage after the expiration of the contract. There are only few traders who would want to physically buy crude, so the difficult task of selling the 70,000 contracts in two days added to the pressure on WTI.
Early hours of today, Brent crude was trading down US$46.15 a barrel and WTI was at US$43.68.