Oil price dips below $46 as Opec production climbs

Oil slipped under $46 a barrel yesterday after the Organization of the Petroleum Exporting Countries (Opec) reported that the group’s production climbed last month.

Opec said output climbed the most in six months in May because of renewed pumping in Libya and Nigeria, members exempt from the group’s accord to lower production.

Oil has traded below $50 a barrel amid concerns that growing US supplies are overwhelming production cuts by the Opec members and allies. The US oil rig count is at the highest level since April 2015, and the Energy Information Administration sees output from major shale plays expanding to a record 5.48m barrels a day in July.

Meanwhile, Saudi Arabia Energy Minister Khalid Al-Falih said stockpiles are beginning to shrink and reductions will accelerate in the next three to four months.

The Saudis are “clearly losing their influence here, because the data just isn’t supporting their assertion that the market is coming into balance”, said John Kilduff, a partner at Again Capital, a New York-based hedge fund.

“The inventory report is a counterweight along with the Saudi comments. You continue to have this battle over who and what to believe,” he said.

Opec said a long-awaited rebalancing of the oil market was still underway, though at a slower pace. Opec said oil inventories in industrialised countries dropped in April and would fall further in the rest of the year, but a recovery in US production was slowing efforts to get rid of excess supply.

Bloomberg and Reuters