A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the Siberian city of Kogalym, Russia. File Picture: REUTERS/SERGEI KARPUKHIN
A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the Siberian city of Kogalym, Russia. File Picture: REUTERS/SERGEI KARPUKHIN

Tokyo — Oil markets held near seven-month lows on Tuesday as investors focused on persistent signs of rising supply that are undermining attempts by cartel Opec and other producers to support prices.

Brent futures rose 4c to $46.95 at 2.14am GMT. On Monday, they fell 46c or 1% to settle at $46.91 a barrel.

That was their lowest since November 29, the day before the Organisation of the Petroleum Exporting Countries (OPEC) and other producers agreed to cut output for six months from January.

US West Texas Intermediate crude futures were down 1c at $44.19 a barrel. They declined 54c or 1.2% in the previous session, to settle at $44.20 a barrel, the lowest close since November 14.

Market fundamentals are going in the right direction, but in light of the large surplus in stockpiles over the past years, the cut needs time to take effect.
Saudi Energy Minister Khalid al-Falih

The July contract will expire on Tuesday and August will become the front month.

Both benchmarks have fallen about 15% since late May, when Opec, Russia and other producers extended by nine months the cut in output by 1.8-million barrels a day.

"Recent data points are not encouraging," Morgan Stanley said in a research note. "Identifiable oil inventories — both crude and product in the Organisation for Economic Co-operation and Development (OECD), China and selected other non-OECD countries — increased at a rate of about 1-million barrels a day in the first quarter."

Opec supplies jumped in May as output recovered in Libya and Nigeria, two countries exempt from the production cut agreement.

Libya’s oil production has risen by more than 50,000 barrels a day after the state oil company settled a dispute with Germany’s Wintershall, a Libyan source told Reuters.

Analysts said rising US crude production had fed the global glut. Data on Friday showed a record 22nd consecutive week of increases in US oil rig numbers.

Still, Saudi Energy Minister Khalid al-Falih remained confident Opec’s cuts were working. The oil market is heading in the right direction but still needs time to rebalance, al-Falih told the London-based newspaper Asharq al-Awsat.

"In my opinion, market fundamentals are going in the right direction, but in light of the large surplus in stockpiles over the past years, the cut needs time to take effect."

Reuters

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