Crude oil prices testing new lows in early Tuesday trading as concerns about an oversupplied market drag into late June. File photo by Monika Graff/UPI | License Photo
June 20 (UPI) -- Crude oil prices moved to fresh lows in early Tuesday trading on concerns that production from some OPEC members was thwarting rebalancing efforts.
Crude oil prices during the Monday session started off with modest gains after Saudi Oil Minister Khalid al-Falih told London-based newspaper Asharq al-Awsat that long-term trends were narrowing around a balanced market.
Oil prices came under pressure in June after several reports stated that balance was taking longer to emerge than expected. Saudi Arabia is leading an effort by the Organization of Petroleum Exporting Countries to balance the market with production cuts, though output from several members has been slow to evaporate.
Libya and Nigeria, two OPEC member states exempt from the agreement because of national security issues, have posted considerable gains in production since April. Libyan officials in particular are expecting gains to accelerate during the summer.
The gains from both countries could push total OPEC production higher into the second half of the year. Tamas Varga, an analyst at London oil broker PVM, said in a daily emailed newsletter there may be another 300,000 barrels per day coming from Middle East producers.
"The perceived rebalancing in the second half [of the year] can be in jeopardy unless these extra barrels are allocated between the other member states," he said in the report.
Crude oil prices were in a free fall in early Tuesday trading. The price for Brent crude oil was down 2.4 percent to $45.77 per barrel about a half hour before the start of trading in New York. West Texas Intermediate, the U.S. benchmark for the price of oil, was lower than the previous close by 2.4 percent to $43.36 per barrel.
Markets may be anticipating the latest report on crude oil and gasoline inventories from the American Petroleum Institute. Gasoline inventories in particular have been a growing concern as they offer an indication of demand. In its weekly market report, U.S. motor club AAA said consumer demand for fuels has dropped off steadily since the long Memorial Day holiday weekend in May.
A survey from S&P Global Platts this week said to expect a decline in gasoline inventories of 750,000 barrels and a drop in crude oil of 2 million barrels.