Oil price falls below $45 for first time in 2017

That is just above the price seen in November, when OPEC and 10 other oil-producing countries agreed to cut their production to combat a growing supply glut and push the market up.

US crude futures were up 6 cents at $42.59 a barrel.

The fall in crude price came despite larger than expected USA crude and gasoline inventories, a sign that confidence in the OPEC deal is shaky.

Oil prices rose in late 2016 and early 2017 in response to the OPEC agreement, but weeks of surprisingly high inventory figures shifted sentiment among speculators who are shedding long positions as the crude glut persists.

West Texas Intermediate crude futures for August delivery were up 4 cents at $43.55, having hit their lowest since September on June 20.

USA crude production has been steadily growing and last week rose to 9.35 million bbl/d, up 20,000 bbl/d from the previous week, the EIA said. Instead, U.S. oil producers aggressively reduced their cost basis and have been increasing rig counts as prices rallied out of the February 2016 low. That means they cut output by more than they were required to do. So far in 2017, crude oil stored in tankers has risen 23% in Singapore.

So far this year, oil has lost 20% in value, its worst performance for the first six months of the year since 1997.

Nigeria's crude oil exports are set to surpass two million barrels per day (bpd) in August, the highest in 17 months, as the country's oil and gas industry nears a full recovery from attacks by the Niger Delta militants that crippled production in 2016. "No, neither does the market", Rabobank analysts told clients, referring to Brent crude futures, which have slid nearly 10 percent this month LCOc1.

With production rising in Nigeria and Libya - which are exempt from the deal - and output surging in the United States, which was not part of the agreement, many bulls appear to have thrown in the towel. According to its estimates, with an annual horizon the average WTI oil price will be $48 a barrel and this is still good.

The market largely shrugged off comments overnight from Iran's oil minister that members of OPEC are considering deeper cuts in production. Even a decline in US crude and gasoline stockpile last week, usually a bullish factor, wasn't able to reverse the bearish sentiment. The collapse in USA gasoline usage (chart above) is concerning as well not only for the bearish implications for the oil market but because it could be a sign of broader economic woes.

  • Zachary Reyes