Oil prices sank 3 percent to a three-week low on Wednesday as an increase in Libyan output helped boost monthly OPEC crude production for the first time this year.
Brent notched its fifth straight monthly decline in a row despite OPEC-led output cuts and forecasts that U.S. crude inventories would fall for an eighth straight week since hitting a record at the end of March.
Post-settlement, prices pared some losses as data from the American Petroleum Institute (API) showed crude inventories fell by 8.7 million barrels in the week to May 26 to 513.2 million, compared with analysts’ expectations for a decrease of 2.5 million barrels.
U.S. Energy Information Administration (EIA) report is due at 11:00 a.m. EDT (1500 GMT) on Thursday, delayed a day because of the Memorial Day holiday on Monday.
Brent crude futures for July LCOc1 fell $1.53, or 3.0 percent, to settle at $50.31 a barrel on their last day as the front-month. It was Brent’s lowest close since May 10.
U.S. West Texas Intermediate crude CLc1 fell $1.34, or 2.7 percent, to settle at $48.32 per barrel, its lowest close since May 12.
Brent’s premium over the same U.S. month WTCLc1-LCOc1 narrowed to its lowest in almost five weeks.
For the month of May, Brent fell almost 3 percent, its fifth straight monthly loss. WTI had its third straight monthly decline, ending May down more than 2 percent.
Output from the Organization of the Petroleum Exporting Countries (OPEC) rose in May, the first monthly increase this year, a Reuters survey found. Higher supply from Nigeria and Libya, OPEC members exempt from a production-cutting deal, offset improved compliance by others.
“Even if Libyan output levels from here for a few weeks, current relative strength provides an additional challenge to OPEC given the fact that the elevated Libyan production is not only eating into other OPEC members market share but is also forcing renewed weakening in Brent structure,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Libya’s oil production has risen to 827,000 bpd, above a three-year peak of 800,000 bpd reached earlier in May, the National Oil Corporation said.
OPEC and other producers, including Russia, agreed last week to extend a deal to cut production about 1.8 million barrels per day (bpd) until the end of March 2018.
Compliance with output cuts 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 OPEC and non-OPEC producers were committed to bringing global oil inventories down to the industry’s five-year average.