Oil futures slipped for a third successive session on Wednesday (31 May), as traders continue to fret over rising output from crude producers who are not signatories to a cut agreed by Opec and non-Opec producers in Vienna, Austria last week.
At 2:12pm BST, the Brent front month futures contract was down 2.95% or $1.53 to $50.31 per barrel, while the West Texas Intermediate was down 2.60% or $1.29 to $48.37 per barrel, as Libya, which is not a signatory to Opec's output reduction drive, said it had resolved an outage resulting from a technical issue at the Sharara field.
Following the resolution of the issue, the country's National Oil Corporation said headline production would rise to 800,000 barrels per day (bpd) from 784,000 bpd. The development follows news of the 19th successive weekly rise in the number of operational US oil and gas rigs, as measured by Baker Hughes.
The oilfield services company said 908 rigs were operational in the US last week, up 504 from the same week last year. The market also remains underwhelmed by the decision of Opec and selected non-Opec producers to maintain their previously stated level of output cuts.
At the conclusion of their meeting in Vienna, Austria on 25 May, 14 Opec and 10 non-Opec oil producers, including Russia, decided to extend their collective production cuts of 1.8m barrels per day (bpd) by another nine months to March 2018 but against market expectations of a longer, deeper cut.
Fawad Razaqzada, technical analyst at Forex.com, said the short-term focus is going to shift back to the US, where oil production has been rising again in recent weeks. "Any further sharp rises in US oil production or the rig counts for that matter would only raise doubts about the efficacy of the Opec and Russia's efforts. That being said, US crude stockpiles have been falling over the past seven weeks, and this trend may continue as the driving season kicks into a higher gear.
"So the oversupply situation is not as pronounced in the US as the weekly increases in oil production make it out to be. But the US oil situation is likely to be a long-term factor."
Away from the oil market, precious metals rebounded from overnight lows on a lower dollar. At 2:46pm BST, Comex gold for August delivery was up 0.07% or 90 cents to $1,266.60 an ounce, while spot gold was 0.18% or $2.22 higher at $1,265.31 an ounce.
Kash Kamal, senior research analyst at Sucden Financial, said demand for the yellow metal seems to be improving in ebbs and flows against a backdrop of geopolitical uncertainty in conjunction with rising inflationary pressure.
"Price volatility has become more pronounced in recent months as opposing forces are exerted on the precious metal long considered a safe haven as well as a hedge against inflation."
Elsewhere, spot platinum was up 0.44% or $4.16 to $943.25 an ounce, while Comex silver was down 0.84% or 15 cents to $17.28 an ounce.