NEW YORK (Reuters) - Brent crude oil on Tuesday closed at its lowest level this year, erasing all of the gains since OPEC started to cut production, after breaking through a key technical support level.
The market was already trading lower prior to the technical selloff on reports of rising output in the United States, Canada and Libya and declining compliance by members of the Organization of the Petroleum Exporting Countries with the deal to cut output during the first half of this year.
Brent LCOc1 futures fell $1.06, or 2.1 percent, to settle at $50.46 a barrel. That was the lowest close since Nov. 29, the day before OPEC agreed to cut supply, although Brent briefly dropped to even lower levels in intra-day trading in March.
U.S. West Texas Intermediate crude CLc1 fell $1.18, or 2.4 percent, to $47.66 a barrel, its lowest close since March 21.
The sharp technical decline came after U.S. futures fell below last week’s low of $48.20 a barrel, which was their lowest since late March.
In the five minutes after prices fell below that key technical level, over 50,000 U.S. contracts traded, representing about 10 percent of total trade at that time on Tuesday.
“The market was already down on concerns about rising Libyan and U.S. production and a Reuters report showing lower compliance to the OPEC production cut agreement,” said Phil Flynn, senior energy analyst at Price Futures Group in Chicago.
Oil prices pared losses briefly in aftermarket trading after data from the American Petroleum Institute showed that U.S. crude stocks fell 4.2 million barrels last week, with Cushing, Oklahoma, inventories drawing by 215,000 barrels. The U.S. government will release its inventory data on Wednesday at 10:30 a.m. (1430 GMT).
OPEC’s compliance with the output cuts fell to 90 percent in April from a revised 92 percent in March, according to a Reuters survey. Earlier, the survey showed compliance in March was 95 percent.
OPEC and other producers, including Russia, plan to meet on May 25 and are widely expected to keep output limits for the rest of the year.
OPEC oil output fell for a fourth straight month in April, a Reuters survey showed, dropping to 31.97 million bpd as Nigeria and Libya pumped less crude.
Libya’s National Oil Co, however, said on Monday that production had risen above 760,000 bpd to its highest since December 2014, and it plans to keep boosting production.
BP Plc (BP.L) Chief Financial Officer Brian Gilvary told Reuters that oil inventories would keep falling this year.
“If the OPEC cuts get rolled into the second half of the year, that will underpin oil prices,” Gilvary said. “We are managing things around $50-$55 a barrel. That’s probably the range we would expect for the rest of the year.”
(Corrects headline and lead to say Brent closed at its lowest level in 2017, not fell to its lowest level in over 5 months)
Additional reporting by Christopher Johnson in London and Osamu Tsukimori in Tokyo; editing by Chris Reese and Marguerita Choy