LONDON – Oil prices nosedived to seven-month lows after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and other producers to support the market through reduced output.
At one point Tuesday, Brent crude touched its lowest level since April 2016 and WTI crude hit its lowest since February 2016.
U.S. crude fell 2.99 percent to $42.88 per barrel in late morning and Brent was last at $45.67, down 2.64 percent.
The benchmarks are down more than 15 percent since late May, when the Organization of the Petroleum Exporting Countries, Russia and other producers extended limits on output until the end of March 2018.
"At the moment sentiment is bearish and traders seem happy to keep selling into every rally," said Fawad Razaqzada, financial markets technical analyst at Forex.com.
U.S. oil production has been rising quickly this year, feeding the global glut. Data on Friday showed a record 22nd consecutive week of increases in U.S. oil drilling rigs.
"Recent data points are not encouraging," Morgan Stanley analysts said in a note to clients. "Identifiable oil inventories – both crude and product in the OECD, China and selected other non-OECD countries – increased at a rate of (about) 1 (million bpd) in Q1."
But Saudi Energy Minister Khalid al-Falih said the oil market is heading in the right direction and just needs time to rebalance, the London-based newspaper Asharq al-Awsat reported on Monday.
OPEC supplies jumped in May as output recovered in Libya and Nigeria, both exempt from the production reduction agreement.
Libya's oil production rose more than 50,000 bpd to 885,000 bpd after the state oil company settled a dispute with Germany's Wintershall, a Libyan source told Reuters.
Nigerian oil supply is also rising. Exports of Nigeria's Bonny Light crude are set to reach 226,000 bpd in August, up from 164,000 bpd in July, loading programs show.
"The increasing August export program in Nigeria and the jump in Libyan oil output should pressure oil prices further in the short term," said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
"If we get bearish U.S. oil statistics this week, we could see a test of $45 on Brent," Varga said.
(Additional reporting by Aaron Sheldrick in Tokyo)