Oil prices dropped to six-week lows on Thursday, under pressure from high global inventories and doubts about OPEC’s ability to implement agreed production cuts.
Brent crude oil fell 30 cents to $46.70 a barrel, its weakest since May 5 and just above six-month lows, before recovering a little to trade around $46.90 by 1345 GMT.
U.S. light crude was down 25 cents at $44.48, also not far off six-month lows.
Both crude benchmarks have lost all the gains made at the end of last year after the Organization of the Petroleum Exporting Countries agreed with other big producers to cut output in an effort to prop up prices.
OPEC and its allies have promised to restrict output until at least the end of the first quarter of next year to try to drain surplus supply.
But inventories are near record highs in many parts of the world, and many traders expect further price falls.
“Oil prices are pinned near their lowest level in seven months,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates, adding that the market showed “little in the way of upside potential”.
Crude prices have fallen about 12 percent since May 25, when OPEC agreed to extend its output limits into next year.
Despite the deal, some OPEC members, including Nigeria and Libya, have been exempt from cutting and their rising output is seen to be undermining efforts led by Saudi Arabia.
“OPEC 2017 year-to-date exports are only down by 0.3 million barrels per day (bpd) from the October 2016 baseline,” analysts at AB Bernstein wrote.
OPEC’s pledge was to cut some 1.2 million bpd, while other producers including Russia agreed to bring the total reduction to almost 1.8 million bpd.
But production in the United States, which is not part of the deal, has jumped 10 percent over the past year to 9.33 million bpd. <C-OUT-T-EIA>
“Production growth in Libya and Nigeria and continued rig additions in the U.S. are complicating the picture, raising doubts on OPEC’s strategy,” AB Bernstein said.
The U.S. government’s Energy Information Administration has raised its forecast for domestic output growth in 2017 to 460,000 bpd from a predicted decline of 80,000 bpd in December.
OPEC now expects U.S. production to increase by 800,000 bpd in 2017.
This suggests global oversupply will persist for a while.
The International Energy Agency says it expects oil supplies next year to outpace demand despite consumption hitting 100 million bpd for the first time.
– Oil producer Norway bans use of heating oil in buildings –
Oil producer Norway will prohibit the use of oil and paraffin to heat buildings from 2020 as it tries to rein in domestic emissions of greenhouse gases, the government said on Thursday.
The ban will cover new and old buildings, and applies to private homes and businesses as well as publicly owned facilities, the Ministry of Climate and Environment announced.
“Those using fossil oil for heating must find other options by 2020,” Environment Minister Vidar Helgesen said in a statement.
Recommended alternatives to oil-based products include heat pumps, electricity from the country’s hydroelectric grid and even special stoves burning wood chips, he added.
The directive is set to cut Norway’s emissions of heat-trapping greenhouse gases by an estimated 340,000 tonnes per year, compared to overall national emissions of 53.9 million tonnes in 2015, the ministry said.
Under the Paris climate agreement, Norway plans to make sharp cuts in emissions by 2030. Norway’s emissions were 3.3 percent above 1990 levels last year, despite past pledges of reductions.
Additional measures could include limitations on the use of natural gas for heating, the ministry said.
The fossil ban is a paradox for Norway, green groups say, as the country generates half its export revenues from crude oil and natural gas, lifting per-capita gross domestic product to around $70,000, one of the world’s highest.
Zero, a Norwegian foundation promoting emission cuts, applauded the decision.
“This is a very important climate measure that significantly cuts emissions, sending a powerful signal that we are moving from fossil to renewable energy,” Zero said in a statement.
Norway pumps about 2 million barrels of oil, condensate and natural gas liquids per day, while its daily output of natural gas stands at around 300 million cubic metres.