Oil prices slumped on world markets Tuesday amid growing concern that the Organization of Petroleum Exporting Countries' production cutback will not make a significant dent in the global oil surplus until late this year.
Late in the day, the American Petroleum Institute reported that gasoline and home heating oil inventories increased substantially last week in the United States, the largest oil-consuming nation.
OPEC appears to be close to achieving its goal of reducing output by nearly 4 million barrels to about 16.8 million barrels a day in September and October.
But energy analysts said the cartel's surplus output during the summer could weigh down prices as these excess supplies hit the marketplace.
Oil prices had risen by more than $4 a barrel in the aftermath of OPEC's Aug. 5 accord until heavy selling erupted Monday on the New York Mercantile Exchange.
The European spot market, where oil is sold to the highest bidder, followed the U.S. lead and weakened Tuesday.
"The OPEC agreement on paper looks good," said Jay Amberg, crude-pricing editor of the Oil Buyers' Guide in Lakewood, N.J. "But in fact there are still vessels transiting oil from the Persian Gulf that were loaded in August when Saudi Arabia's production was at record levels." Amberg said these tankers would be arriving in the United States, already "besieged by too much crude oil and petroleum products, through October--if not November."
On the European spot market, Britain's North Sea Brent crude dropped 20 cents to $14.95 a barrel.
West Texas intermediate, the benchmark U.S. crude for immediate delivery on the Merc, fell 35 cents to $15.27 a barrel. Analysts said selling accelerated after the key crude broke through the critical $16-a-barrel mark during Monday's session.