Oil slumps back near pre-Opec deal levels as glut stays unabated

[HONG KONG] Oil headed for a third weekly drop on concern rising supply from the US to Nigeria will undermine Opec-led output curbs, with crude back near levels before the group agreed on the cuts in an effort to prop up prices.

Futures were little changed in New York, down 4.3 per cent this week.

US data released Wednesday showed oil and fuel stockpiles rose, going against expectations of further declines. American crude output is also seen surging in 2018 to a record above 10 million barrels a day. In Nigeria, Royal Dutch Shell Plc lifted restrictions on exports of a key grade halted for more than a year.

Oil has largely given up its gains after the Organization of Petroleum Exporting Countries and its allies including Russia agreed late last year to curb output. A persisting glut as the US increases drilling has kept prices under pressure. Even this week, the oversupply has kept oil in check amid turmoil in the Middle East, the world's largest producing region, as a Saudi Arabia-Qatar diplomatic feud flared and suicide bombers struck Iran's capital Tehran.

"It's the ongoing theme of increasing supply and relatively high stockpiles, which can't seem to fall," said Daniel Hynes, an analyst in Sydney at Australia & New Zealand Banking Group Ltd.

"The inventory build in the US spooked the market with such a huge miss on expectations. There is a clear lack of any bullish catalyst at the moment."

West Texas Intermediate for July delivery was at US$45.60 a barrel on the New York Mercantile Exchange, down 4 US cents, at 12.01pm in Hong Kong. Total volume traded was about 17 per cent above the 100-day average. Prices lost 8 US cents to close at US$45.64 on Thursday, the lowest since May 4.

Brent for August settlement was 4 US cents lower at US$47.82 a barrel on the London-based ICE Futures Europe exchange. Prices are down 4.3 per cent this week. The global benchmark crude traded at a premium of US$1.99 to WTI for August.

Libya resumed production at the Sharara oil field, the nation's biggest, and output will reach normal levels within three days, National Oil Co said on its website. It closed Wednesday after a protest by workers, according to a person with direct knowledge of the matter.

BLOOMBERG