The price of oil has fallen to the lowest point in seven months amid concerns of an oversupply.
Reuters reported that benchmark Brent crude fell to $45.62 a barrel, down $1.29, by 1 p.m. (1700 GMT). It was the weakest level for the benchmark since November 15, 2016, just before an agreement was reached by producers to cut output.
The U.S. crude futures contract for July fell to $42.93, its lowest since November 14. MarketWatch reports that the price retreat puts U.S. crude in bear-market territory, defined as a drop of at least 20% from a recent peak. Both benchmarks are down more than 15% since late May.
“At the moment sentiment is bearish and traders seem happy to keep selling into every rally,” Fawad Razaqzada, a financial markets technical analyst at Forex.com, told Reuters.
The Organization of the Petroleum Exporting Countries, Russia, and other producers have agreed to extend limits on output until the end of March 2018. But OPEC supplies increased in May as output recovered in Libya and Nigeria. Libya and Nigeria are both exempt from the production reduction agreement.
U.S. shale-oil drillers, who aren’t part of the output agreement, are seen as the main culprit in disrupting OPEC’s efforts to stabilize prices. Late last week, data showed the number of U.S. oil-drilling rigs increased for the twenty-second consecutive week, a record.
“The increasing August export program in Nigeria and the jump in Libyan oil output should pressure oil prices further in the short term,” Tamas Varga, senior analyst at PVM Oil Associates, told Reuters.
“If we get bearish U.S. oil statistics this week, we could see a test of $45 on Brent,” he added.
In a note to clients, Morgan Stanley analysts called recent data points, “not encouraging,” saying identifiable oil inventories increased.
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