Oil steadied on June 21, paring earlier losses, but was set for its largest price slide in the first half of any year for the past two decades, as investors discounted evidence of strong compliance by major producers with a deal to cut global output.
August Brent crude futures were flat at $46.02 a barrel (bbl) by 6:07 a.m. CT (11:07 GMT), having fallen earlier to seven-month lows.
West Texas Intermediate crude futures for August delivery were up 4 cents at $43.55, having hit their lowest since September on June 20.
So far this year, oil has lost 20% in value, its worst performance for the first six months of the year since 1997.
Compliance with an agreement by OPEC and other producers to cut output by 1.8 million bbl/d from January reached its highest in May since the curbs were agreed last year.
"The slide in oil prices seems to be unstoppable," said Julius Baer commodities research analyst Carsten Menke.
"The supply deal’s effectiveness is increasingly questioned. We believe that downside risks to oil prices from a [disorderly] and early unwinding have risen ... we still see prices trading sideways, spending more time in the high 40s than the low 50s as growing shale output and stagnant western world oil demand undermine the Middle East's restriction efforts," Menke said.
Data from the American Petroleum Institute on June 20 showed U.S. crude stockpiles last week had dropped more than forecast. Gasoline and distillate inventories rose.
A government report on inventories is due at 9:30 a.m. CT (14:30 GMT) on June 21 and the official figures often differ sharply from those of the industry group.
OPEC and non-OPEC oil producers' compliance with the output deal reached 106% in May, a source familiar with the matter said June 20. That means they cut output by more than they were required to do.
OPEC compliance with the curbs was 108%, while non-OPEC compliance was 100%, the source said. Another source confirmed compliance by all producers in May was 106%.
While compliance is high, it is what went on before the production cut that counts, BMI Research said in a note.
"A number of producers—notably Iraq, Saudi Arabia and Russia—aggressively ramped up output in the run-up to the deal, fast-tracking projects, expanding drilling programs and deploying spare capacity," BMI said.
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