Oil prices fell nearly one percent on Tuesday on news that Iran and Libya have continued to increase production, overshadowing an OPEC agreement struck last week to freeze output levels in a bid to stem a two-year price rout.
Benchmark Brent crude oil futures LCOc1 were trading down 40 cents, or 0.8 percent, at $50.49 a barrel at 0826 GMT.
U.S. West Texas Intermediate (WTI) crude CLc1 was down 42 cents, or 0.9 percent, at $48.39 a barrel.
“Today’s losses should come as no surprise as Libyan production is climbing higher and Iranian exports are on the rise too. Add to these that the dollar is strengthening and you have a bearish cocktail,” said Tamas Varga, analyst at PVM Oil Associates in London.
Iran’s crude oil and condensate sales have likely approached levels last seen at peak time in 2011 before western sanctions were imposed, sources with knowledge of the matter said.
Iran, which is allowed to produce “maximum levels that make sense” as part of an output limit agreed by the Organization of the Petroleum Exporting Countries (OPEC) last week, likely sold 2.8 million barrels per day (bpd) of crude and condensate in September, the sources said.
At the same time, production is also rising in Libya, which is also exempt from an output freeze. The country’s Arabian Gulf Oil Company (AGOCO) said its production had risen to 320,000 bpd, up from about 290,000 bpd late last week, helping to push the country’s production above 500,000 bpd.
AGOCO, a subsidiary of the Libya’s National Oil Company that operates mainly in eastern Libya, has roughly doubled production since forces loyal to eastern commander Khalifa Haftar seized blockaded oil terminals last month and the NOC said it would reopen them for exports.
Focus is now shifting to the end of November when OPEC will decide individual members’ output ceilings.
Oil prices also took a knock from a stronger dollar .DXY, which reached a 13-day high again a basket of major currencies after a positive U.S. economic survey increased investors’ confidence in a rise in U.S. interest rates by the end of the year.
Oil investors are also keenly awaiting the latest U.S. commercial crude oil stocks data, which has surprised the market over the past four weeks with unexpected drawdowns.
A Reuters poll showed analysts expect a 2.7 million-barrel rise in stocks in the week ending Sept. 30.