London: Brent crude oil prices lost ground on Tuesday, trading at their lowest level since early February, as concerns over a growing supply glut mounted.
Analysts said that rising US crude oil stocks, an increase in Libyan oil production and the chance of an agreement between Iran and the West that could ease sanctions on the oil producer and boost its exports are all pulling prices lower.
“The focus is on the bearish side,” said Bjarne Schieldrop, chief commodities analyst with SEB in Oslow. “When people look at the market now, they are looking at the possibility of an Iran resolution,” Brent, which rose to a session high of $54.38 (Dh199.73), was trading at $53.11, down 33 cents, by 1016 GMT. The April contract that expired in the previous session closed down $1.23 after hitting $52.50 earlier on Monday, its lowest since February 2.
US crude, or West Texas Intermediate (WTI), was at $43.11 a barrel, down 77 cents and slightly above 6-year lows of $42.85 marked on Monday.
Though fighting between rival governments has complicated Libya’s oil production, an industry source said it has now risen to 489,000 barrels per day after the restart of the Al Feel and Wafa oilfields.
Further weekly data on US crude inventories was due later on Tuesday from industry group the American Petroleum Institute (API), and some traders expect the gap between Brent and WTI to widen further.
While the US rig count dropped to 1,125 last week from 1,809 rigs a year ago, past cycles have shown there is “often a lag between when drilling stops and when oil supply stops growing”, Morgan Stanley said in a note.
“We expect WTI to remain under pressure as inventories swell further as the seasonal maintenance period begins. We expect this to remain the case in the short term,” ANZ bank said.
A Reuters poll showed a likely build in US crude inventories for a tenth week to a new record high.
Some see the possibility for markets to stabilise or even rise, with Vitol chief executive Ian Taylor telling a conference on Tuesday that oil markets would “come into balance” by the second half of the year.
However the potential of a nuclear deal that could end sanctions against Iran, allowing Tehran to send more of its oil into the market, also dragged on oil markets.
“If sanctions were to be lifted, up to 1 million barrels per day of additional oil could reach the market from Iran in the second half of the year, making it more difficult for prices to recover,” Commerzbank said in a note on Tuesday.