Oil Drops to Seven-Month Low as Libya Adds to Persistent Surplus

(Bloomberg)

Oil dropped to the lowest in seven months amid a revival in output from Libya and rising volumes of fuel held in floating storage.

Futures lost as much as 2.9 percent in New York after falling 1.2 percent Monday. Libya is pumping the most crude in four years after a deal with Wintershall AG enabled at least two fields to resume production. The amount of oil stored in tankers reached a 2017 high of 111.9 million barrels earlier this month, according to Paris-based cargo tracking company Kpler SAS.

Oil has slipped below $45 a barrel as supplies in the U.S. remain plentiful and drillers continue to add rigs, raising concerns output cuts by the  Organization of Petroleum Exporting Countries and allies including Russia won’t succeed in draining bloated stockpiles. Traders are storing more crude at sea amid swelling production in the Atlantic region, a sign the market is far from rebalancing.

“Right now there is little support to be found in light of recent supply-side developments, including further reinstatement of production in Libya, another rise in the U.S. rig count and reports of floating storage building up again,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “Producers are using moral suasion but that appears to be falling on deaf ears for now.”

West Texas Intermediate for July delivery, which expires Tuesday, was down $1.14 to $43.06 a barrel on the New York Mercantile Exchange at 1:37 p.m. in London, the lowest since Nov. 14. Total volume traded was about 80 percent above the 100-day average. The more-active August contract fell $1.09 to $43.34.

Brent for August settlement dropped $1.14 to $45.77 a barrel on the London-based ICE Futures Europe exchange. Prices fell 1 percent to $46.91 on Monday. The global benchmark crude traded at a premium of $2.45 to August WTI.

U.S. inventories probably shrank by 1.2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday. Crude stockpiles remain more than 100 million barrels above the five-year average, according to data from the EIA. American production climbed to 9.33 million barrels a day through June 9, near the highest since August 2015.

Oil-market news:

Libya is pumping about 900,000 barrels a day, according to a person with direct knowledge of the matter, who asked not to be identified for lack of authority to speak to the media. There were 5,946 drilled-but-uncompleted wells in U.S. oilfields at the end of May, the most in at least three years, according to EIA estimates. Pierre Andurand’s oil hedge fund lost 17.3 percent in the year through May as one of the world’s most prominent energy bulls suffered in the wake of last month’s OPEC meeting, according to a document outlining the fund’s performance.