Oil prices fell nearly one per cent on Tuesday on news that Iran and Libya have continued to increase production, overshadowing an OPEC agreement struck last week to freeze output levels.
The Organisation of Petroleum Exporting Countries, OPEC, agreed on output freeze in Algiers in a bid to stem a two-year price rout.
Early on Tuesday, Benchmark Brent crude oil futures were trading down 40 cents, or 0.8 per cent, at 50.49 dollars a barrel.
The U.S. West Texas Intermediate (WTI) crude was also down 42 cents, or 0.9 per cent, at 48.39 dollars 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,” Tamas Varga, analyst at PVM Oil Associates, said 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 OPEC last week, likely sold 2.8 million barrels per day (bpd) of crude and condensate in September,” the sources said.
In a further sign it plans to lift output, Iran on Tuesday signed its first new style contract with a domestic company to upgrade two of its oil fields.
Iran wants to regain its pre-sanctions production level of four million bpd.
At the same time, production is also rising in Libya, which was also exempted from an output freeze in Algiers.
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.
Oil prices also took a knock from a stronger dollar which reached a 13-day high against a basket of major currencies.
The rise was due to a positive U.S. economic survey which 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 draw downs.