Brent crude and West Texas Intermediate (WTI) oil prices rally after trading near seven-month lows

Courtney Goldsmith
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Oil prices have fallen around 13 per cent since the day Opec agreed to extend cuts to production (Source: Getty)

Oil prices are rallying after trading around seven-month lows overnight amid concerns the Organisation of the Petroleum Exporting Countries' (Opec) output cuts are not doing enough to curb the global oversupply.

Global benchmark Brent crude rose 0.83 per cent to trade at $47.31 a barrel while the price of the US benchmark, West Texas Intermediate (WTI), was 0.63 per cent higher at $44.74 a barrel.

A pause in exports from Libya helped bolster prices today. Libya and Nigeria, which are exempt from Opec's cuts, ramped up production in May, helping push the cartel's crude production to an average of 32.14m barrels per day (bpd), up from 31.8m bpd in April.

However, prices for both benchmarks are still way down from the prices seen ahead of Opec's decision on 25 May to extend its deal to cut production until March 2018 - Brent traded around $54 per barrel while WTI was priced at $51 per barrel in the days before the meeting.

Booming production in the US is also adding pressure to prices.

The weekly Baker Hughes Rig Count, which is out later today, is expected to show another increase in operational rigs. Crude output in the US has shot up in the past year, rising more than 10 per cent to 9.3m bpd. The US Energy Information Administration (EIA) expects production to rise above 10m bpd in 2018.

A report earlier this week found growing oil supply is set to outpace demand next year as production outside Opec is expected to grow twice as quickly in 2018 as it will this year.

Analysts Mike van Dulken and Henry Croft at Accendo Markets said:

"Brent Crude needs a break above $47.20 to spell an extended recovery, while a retracement to $46.80 would get the bears interested. US crude will need to complete a test of falling highs resistance at $44.60 for a march to $45 and above, while on the down side $44.30 could warn of fresh lows."

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