After a week of steady gains in the August delivery price for benchmark West Texas Intermediate (WTI) crude oil, a report that Russia would not cooperate with either a second extension of the current reduction level beyond next March or a further cut in production has sent crude prices tumbling again. WTI for August delivery traded down about 3.7% in the noon hour Wednesday at $45.32, after closing at $47.07 on Monday.

Analysts do not believe that the inventory glut can be solved by simply maintaining the 1.6 million barrel per day cuts that have been in force since January and are expected to last through the first quarter of 2018.

The weekly report from Baker Hughes released last Friday showed that the U.S. rig count had dropped by two and that produced a solid gain in the price of WTI on Monday. That was the first decline in the U.S. rig count since the beginning of the year.

Because most of the new rigs that have come online in the United States take about six months to progress from initial drilling to first production, U.S. production is expected to continue rising throughout most of the rest of this year. Unexpectedly high production from Nigeria and Libya has also weighed on Brent crude pricing, down more than 3% Monday at $48.05 a barrel.

The Wall Street Journal noted this morning that Saudi Arabia lowered the contract price it charges its Asian customers, interpreting the reduction as a signal that the Saudis will defend their market share rather than hold the line on prices.

The U.S. Energy Information Administration will report U.S. commercial oil inventory data Thursday, one day later than usual owing to the Independence Day holiday. The American Petroleum Institute is expected to issue its report on oil stockpiles later today.

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