Oil fell as investors sought reassurance that the world’s largest oil producing countries are complying with their supply-cut deal.
Futures slid as much as 2.1 per cent in New York.
Oil in New York was unable to hold its advance above $50 a barrel last week as signs of rising global supply eroded optimism that output curbs by the Organisation of Petroleum Exporting Countries (OPEC) and its partners are rebalancing the market. Compliance with promised production cuts was 86 per cent in July, according to a Bloomberg survey.
West Texas Intermediate for September delivery fell 37 cents to $49.21 a barrel on the New York Mercantile Exchange.
Brent for October settlement dropped 27 cents to $52.15 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.77 to October WTI. Russia and Kuwait were said to meet producers such as Iraq in Abu Dhabi to discuss compliance to OPEC production-cut deal.
Libya’s production recovery was back on track as operations at its biggest oil field, Sharara, returned to normal after being halted Sunday by armed protesters. Rebounding Libyan supply has hindered efforts by fellow OPEC members to plug a global glut. Worldwide drilling reached its highest in almost two years in July, according to Baker Hughes Inc.
“The OPEC concerns are certainly going to keep crude from breaking out,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “Before we see a significant takeoff, we are going to have to see commitment from OPEC that they are in it for as long as is required. They are going to have to come out and make those statements.”
Saudi Arabia said last month that it planned to increase pressure on nations failing to comply with their pledged cuts. Russia and Kuwait experts started two days of separate meetings with representatives of Iraq, U.A.E., Kazakhstan, Malaysia in Abu Dhabi to discuss countries’ compliance with global crude production cuts, according to people familiar with situation, who asked not to be identified.
“I don’t think anything will come out of that,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Maybe that is making people a little bearish — because they think something needs to be done about Libya and Nigeria.”
OPEC’s plan to cut production has “misfired” and the group would have been better with a deeper cut for a shorter period of time, Francisco Blanch, Bank of America Merrill Lynch global head of commodities research, said in a Bloomberg Television interview.
Libya resuming operations at Sharara “is emblematic of the problems for OPEC and the oil market in terms of just the gross oversupply situation that we remain in,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. The meetings among producers “will be a negative for the market too if they can’t agree on recommending some further measures.”