Picture: REUTERS
Picture: REUTERS

London — Oil prices fell by 1% on Friday to their lowest in more than a week after the International Energy Agency (IEA) said market re-balancing was taking time despite strong demand growth because of weak oil cartel Opec compliance with output cuts.

Brent crude, the global benchmark, was at $51.42 a barrel at 8.30am GMT, down 48c. This was down 0.9% from its last close and its lowest since August 1.

US West Texas Intermediate (WTI) crude was down 48c, or 1%, at $48.11 a barrel, reaching its lowest since July 26.

Oil prices touched two and a half month highs on Thursday, but retreated to close down by about 1.5%, with US prices slipping back below $50 a barrel amid ongoing oversupply concerns.

"There would be more confidence that re-balancing is here to stay if some producers party to the output agreements were not — just as they are gaining the upper hand — showing signs of weakening their resolve," the IEA said in its monthly report.

The IEA said Opec’s compliance with the cuts in July had fallen to 75%, the lowest since the cuts began in January. It cited weak compliance by Algeria, Iraq and the United Arab Emirates. In addition, Opec member Libya, which is currently exempt from the output cuts, steeply increased output.

"Crude oil prices failed to hold recent gains, with a nervous market starting to doubt recent falls in inventories," ANZ bank said in a note. "Supply-side issues also weighed on prices."

Saudi Arabian energy minister Khalid al-Falih said the kingdom did not rule out additional oil production cuts, the Saudi-owned Al-Sharq al-Awsat newspaper reported on Friday.

Meanwhile, US President Donald Trump stepped up his rhetoric against North Korea again on Thursday, saying his earlier threat to unleash "fire and fury" on Pyongyang if it launched an attack may not have been tough enough.

"I think the issue affecting the market is the general risk sentiment of sabre-rattling between Washington and Pyongyang," said Michael McCarthy, chief market strategist at CMC Markets.

Reuters

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