Oil prices have fallen to their lowest since November amid investors’ concerns about the stubborn crude oil glut.
Oil Price Fall to Its Lowest In Five Months
A persistent glut of crude has seen most of the gains achieved last year following an output cut by OPEC become erased.
The fall in oil prices became worse when OPEC representatives downplayed the possibility that the cartel and other oil producing countries would increase their output cuts in a meeting to be held on May 25.
On Thursday, US West Texas Intermediate (WTI) crude future closed trading at $45.52 a barrel, down 4.8 percent or $2.30.
Meanwhile, Brent crude oil futures closed at $48.26 a barrel $2.53, or 5 percent down.
Both futures fell to their lowest since late November when OPEC decided on supply cuts.
According to Gene McGillian, a Tradition Energy manager in Stamford, Connecticut, “The market is looking for a bottom.”
Last year, OPEC and other oil producing countries announced cuts of up to 1.8 million barrels per day (bpd) for the first half of the year.
However, McGillian said, “There is still a near record overhang and signs of greater production in areas of the world outside the oil producing countries that agreed to the cuts.”
In the US, crude output has increased with a growing number of rigs in the past year.
On Wednesday, weekly data by the US government showed that stocks of crude fell 930,000 barrels, although analysts had expected a 2.3 million barrel drop.
Gasoline futures in the US were down almost 4 percent following indications in the stockpile report of a growing weakness in the demand for gas, which has fallen more than 8 percent this year.
In the month of April, OPEC output fell for a fourth consecutive month, according to a Reuter’s survey. Saudi Arabia, the block’s top exporter, continued to keep production low amid weak compliance by other producers in the group.
According to Tamas Varga, an analyst at PMV Oil Associates, “Saudi Arabia is the only country that has come through with its obligation each month since the start of the year.”
He added, “On one hand, it shows commitment from the OPEC leader in an effort to make the supply cut agreement work but one can only wonder how long they are capable of supporting oil prices on their own.”
Outside of OPEC, Russia has made the largest production cuts. As of May 1, output had been cut by over 300,000 barrels per day.