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Oil fell to seven-month lows on Wednesday, set for its largest price slide in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by OPEC and non-OPEC producers with a deal to cut global output.
August Brent crude futures were down 12 cents at $45.85 a barrel by 0838 GMT, after falling nearly 2 per cent in the previous session to their lowest settlement since November.
US crude futures for August were down 7 cents at $43.44, having hit their lowest since September on Tuesday.
So far this year, oil has lost 20 per cent in value, its worst performance for the first six months of the year since 1997.
Compliance with an agreement by the Organization of the Petroleum Exporting Countries and other producers to cut output by 1.8 million barrels per day from January reached its highest in May since the curbs were agreed last year.
“The slide in oil prices seems to be unstoppable,” said Julius Baer commodities research analyst Carsten Menke.
“The supply deals effectiveness increasingly questioned, we believe that downside risks to oil prices from a (disorderly) and early unwinding have risen ... we still see prices trading sideways, spending more time in the high 40s than the low 50s as growing shale output and stagnant western-world oil demand undermine the Middle East's restriction efforts.”
Data from the American Petroleum Institute on Tuesday showed US crude stockpiles last week had dropped more than forecast. Gasoline and distillate inventories rose.
A government report on inventories is due at 10:30 a.m. EDT (1430 GMT) on Wednesday and the official figures often differ sharply from those of the industry group.
OPEC and non-OPEC oil producers' compliance with the output deal reached 106 per cent in May, a source familiar with the matter had said on Tuesday.
OPEC compliance with the curbs was 108 percent, while non-OPEC compliance was 100 per cent, the source said. Another source confirmed compliance by all producers in May was 106 per cent.
While compliance is high, it is what went on before the production cut that counts, BMI Research said in a note.
“A number of producers - notably Iraq, Saudi Arabia and Russia - aggressively ramped up output in the run-up to the deal, fast-tracking projects, expanding drilling programmes and deploying spare capacity,” BMI said.
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