James HesterOil prices softened on Wednesday on the back of rising US oil inventories and higher OPEC production.
Data showing increased output from OPEC comes despite the organisation´s recent agreements to cut production.
Brent crude futures slid by around 0.8% on Wednesday morning, trading at $48.35 per barrel.
OPEC production
Oil output by OPEC members rose by around 336,100 barrels per day (bpd) to 32.1 million bpd in May, a gain of 1% on the month. The rise was attributed to higher production from Libya, Nigeria and Iraq.
While OPEC extended its agreement to cut production in May, the latest increase in output should be expected to make the market more sceptical about the cartel´s ability to deliver meaningful reductions.
OPEC members, in conjunction with certain other major exporters such as Russia, have agreed to cut output by almost 1.8 million barrels per day (bpd) versus the production levels seen at the end of 2016.
North America
Oil has lost some ground over recent weeks, being more than 10% below its closing level on 23 May.
Worries about rising North American production, along with higher US crude stockpiles have largely counteracted bullish sentiment driven by hopes of lower OPEC production and instability in the Middle East.
Data released by the American Petroleum Institute on Tuesday showed US crude stockpiles increased by 2.8 million barrels in the week to June 9, reaching 511.4 million. The result defied expectations for a fall of 2.7 million barrels.
$30 per barrel?
Against the backdrop of abundant supply, some commentators are predicting oil prices could hit the lows seen in early 2016 at some point next year.
Any weakening in global growth and a corresponding decline in demand for crude would likely be an extremely bearish catalyst for a market that is already struggling with high levels of supply.
OPEC could come under increasing pressure to cut its production targets further over the coming months, with much depending on the stance of the cartel´s lead producer Saudi Arabia.