Crude futures were on track for weekly losses on Friday as investors reassessed U.S. data on oil stocks and excesses in oil products in Europe and Asia.
While many expect global oversupply of oil to ease in the near term, huge amounts of crude remain in vessels at sea and storage tanks on land as the rebalancing takes longer than some had anticipated.
“The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion,” UBS oil analyst Giovanni Staunovo said.
“Supply might actually increase in the near term with the further return of disrupted production and higher Middle East production, while demand growth is set to slow in emerging Asia.”
Brent crude briefly fell to a more than two-month low of less than $46 per barrel before rebounding to $46.30 as of 0926 GMT, 10 cents higher. The contract closed 2.1 percent lower in the previous session, and is on track for a decline of more than 2.5 percent for the week.
U.S. West Texas Intermediate traded as low as $44.25 a barrel before bouncing back to $44.74, one cent below the previous close. It ended Thursday down 2.2 percent and is on track to close the week also more than 2.5 percent lower.
In the Middle East, Iraq’s oil exports are set to rise in July, according to loading data and an industry source, putting supply growth from OPEC’s second-largest producer back on track after two months of decline.
Falling prices in the United States, coupled with low shipping costs, have also encouraged traders to send U.S. oil to Europe, which would add to supply in the region.
This has helped the market shake off further disruptions in Nigeria, where the largest stream of crude is under force majeure and pipeline attacks have cut some 700,000 barrels per day from production, according to state oil firm NNPC.
While U.S. production has been falling, crude inventories are at 519.5 million barrels, historically high for this time of year, the government’s Energy Information Administration said this week.
U.S. crude and oil product stocks rose 2.62 million barrels to an all-time high of 2.08 billion barrels as gasoline stocks posted a surprise summer build of 911,000 barrels.
Inventories of oil products have also been climbing in Europe and Asia, with gasoline stocks in the Amsterdam-Rotterdam-Antwerp hub at record highs and BMI Research warning of “brimming stockpiles” in Asia.