Oil slumps back near pre-Opec deal levels as glut stays unabated

Oil headed for a third weekly drop on concern rising supply from the US to Nigeria will undermine Opec-led output curbs, with crude back near levels before the group agreed on the cuts in an effort to prop up prices.

Futures were little changed in New York, down 4.3% this week. US data released on Wednesday showed oil and fuel stockpiles rose, going against expectations of further declines. American crude output is also seen surging in 2018 to a record above 10 million barrels a day.

In Nigeria, Royal Dutch Shell lifted restrictions on exports of a key grade halted for more than a year.

Oil has largely given up its gains after the Organisation of Petroleum Exporting Countries and its allies including Russia agreed late last year to curb output. A persisting glut as the US increases drilling has kept prices under pressure. Even this week, the oversupply has kept oil in check amid turmoil in the Middle East, the world’s largest producing region, as a Saudi Arabia-Qatar diplomatic feud flared and suicide bombers struck Iran’s capital Tehran.

"It’s the ongoing theme of increasing supply and relatively high stockpiles, which can’t seem to fall," said Daniel Hynes, an analyst in Sydney at Australia & New Zealand Banking Group.

"The inventory build in the US spooked the market with such a huge miss on expectations. There is a clear lack of any bullish catalyst at the moment."

West Texas Intermediate for July delivery was at $45.66 a barrel on the New York Mercantile Exchange, down 2 cents, at 1:26 in Hong Kong. Total volume traded was about 17% above the 100-day average. Prices lost 8 cents to close at $45.64 on Thursday, the lowest since May 4.

Brent for August settlement was unchanged at $47.88 a barrel on the London-based ICE Futures Europe exchange. Prices are down 4.1% this week. The global benchmark crude traded at a premium of $1.98 to WTI for August.

Libya resumed production at the Sharara oil field, the nation’s biggest, and output will reach normal levels within three days, National Oil said on its website. It closed on Wednesday after a protest by workers, according to a person with direct knowledge of the matter.

Oil-market news:

Options to buy 10 million barrels of Brent crude for $80 a barrel in December traded Wednesday, far exceeding the next-largest contracts, according to exchange data compiled by Bloomberg.

Nigeria’s four state-owned refineries are currently operating at less than 25% of combined capacity, according to Emmanuel Kachikwu, minister of state for petroleum.