The dramatic rally in oil prices skidded to a halt on Wednesday as traders turned their attention back to the global oil glut and rising production in Libya and Nigeria.
U.S. oil prices fell $1.71 cents, or 3.6 percent, to $45.36 a barrel on Wednesday, snapping the longest streak of rising prices in half a decade. That run had boosted the price up from its annual low of $42.53 a barrel late last month to $47.07 a barrel this week.
But the oil market struck a new tone Wednesday morning when traders reacted to news that OPEC’s crude production climbed to its highest level of the year last month, according to surveys by Reuters and Bloomberg, amid rising output in Nigeria and Libya.
Analysts say OPEC may soon have to decide whether to deepen its oil production cuts to accommodate rising output from the two beleaguered nations, to support prices. Russian officials reportedly said they opposed cutting output further.
Meanwhile, Saudi Arabia has fought hard to carve out a larger piece of the Japanese oil market, exporting 1.3 million barrels a day there in the first half of the year, according to a new analysis by Thompson Reuters.
“The Saudis aren’t relenting,” said John Kilduff, an oil analyst at Again Capital. “That doesn’t speak well of their efforts to limit supply.”
Before Wednesday, oil prices had risen amid declines in the U.S. oil inventory and a flattening of the U.S. rig count. The rally may have also been inflated by thin trading before the U.S. holiday on July 4, Kilduff said.