The U.S. crude futures contract for July, due to expire later on Tuesday, fell $1.20 to $43.00, having earlier touched $42.75, its lowest since November 14. Oil prices refused to blow past $60 even after over90 percent compliance from the oil producers.
Brent for March settlement dropped 26 cents to $55.23 a barrel on the London-based ICE Futures Europe exchange, closing at a $2.48 premium to WTI.
"Crude output from OPEC nations rose by 290,000 bbl/d in May to a 2017 high of 32.08 million bbl/d, still within the confines of the supply deal, after comebacks in Libya and Nigeria, which are exempt from cuts".
Bearish sentiment among oil traders has triggered a wave of short selling, with hedge funds adding 45 million barrels of extra short positions in crude, as well as 15 million in gasoline and 16 million in heating oil. At the same time, bets on falling West Texas Intermediate crude prices surged by nearly a third in the week through June 13, U.S. Commodity Futures Trading Commission data show.
Oil dropped to the lowest level in seven months, pulling energy stocks down, amid growing concerns that OPEC-led output cuts are failing to ease a global supply glut. At the same time, the shale oil production increased by more than 570,000 barrels.
OPEC's strategy of flooding the world with excess oil caused crude to crash as low as $26 a barrel in February 2016.
The news sent oil prices to a five-week low. Despite the reduction in production from oil producers, the level of exports is still high as many tanker-tracking data showed. "Identifiable oil inventories - both crude and product in the Organisation for Economic Co-operation and Development (OECD), China and other selected non-OECD countries - increased at a rate of about 1-million bpd in quarter one". The price for oil is dropping to rates that are now on a relative equal ground with the rates that were announced past year, after the output cuts were first announced. The fall in oil prices hampers the earnings of various oil producers such as Carrizo Oil & Gas (CRZO), Denbury Resources (DNR), and Murphy Oil (MUR), which drives down the energy sector's returns. Production increased in both OPEC and non-OPEC countries. Data on Friday showed a record 22nd consecutive week of increases in USA oil drilling rigs.
Saudi Arabia is the largest contributor within the Organization of Petroleum Exporting Countries to ease supply-side strains through coordinated efforts to sideline about 2 percent of the total demand for oil.