(Bloomberg) — Oil dropped to the lowest level since late November on growing signs that OPEC’s production cuts are failing to clear a surplus of crude.

Futures fell by about 4% on both sides of the Atlantic. U.S. crude output rose to 9.29 million barrels a day last week, the highest level since August 2015, according to the Energy Information Administration. OPEC is likely to extend the 1.2 million barrel-a-day cut agreed to in November for six months, according to Nigerian Oil Minister Emmanuel Ibe Kachikwu.

Oil is heading for a third weekly loss amid concern that increasing U.S. output will offset efforts by the Organization of Petroleum Exporting Countries and its allies to eliminate a global glut. OPEC will meet May 25 in Vienna to decide whether to extend supply cuts through the second half. Russia is said to support prolonging the curbs, according to a government official.

"Evidence is mounting that the OPEC agreement, and the market’s reaction, were much ado about nothing," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone.

West Texas Intermediate for June delivery fell $1.95, or 4.1%, to $45.87 a barrel at 12:20 p.m. on the New York Mercantile Exchange. Futures touched $45.63, the lowest since Nov. 30. Total volume traded was about 37% above the 100-day average.

Brent for July settlement dropped $1.97, or 3.9%, to $48.82 a barrel on the London-based ICE Futures Europe exchange, falling below $50 for the first time since March 22. It touched $48.54, also the lowest since Nov. 30. The global benchmark crude traded at a $2.57 premium to July WTI.

Shares of energy companies followed futures lower. The S&P Oil & Gas Exploration and Production Select Industry index declined as much as 4.9% to the lowest since August.

Lost Faith

"The market appears to have temporarily lost faith in ever seeing an impact of the OPEC cuts on inventories," Michael Cohen, head of energy commodities research at Barclays Plc in New York, said by telephone. "We disagree and think that OPEC will manage to extend the cuts and we’ll see inventories fall in the second half of the year."

U.S. crude output rose by 28,000 barrels a day last week for the longest run of gains since 2012, according to EIA data. Crude stockpiles fell by 930,000 barrels, compared with the median estimate for a 3 million-barrel drop in the Bloomberg survey. Refineries processed 17.2 million barrels of crude a day last week as they utilized 93.3% of their capacity, both down for the first time in seven weeks, according to the agency.

Commodities declined as China’s intensifying clampdown on financial leverage and increased regulatory scrutiny are seen curbing demand in the world’s biggest energy consumer. The Bloomberg Commodity Index dropped as much as 1.8% to the lowest since Nov. 18.

"You can only do so much with supply," Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at U.S. Bank, which oversees $136 billion in assets, said by telephone. "We need to see demand increase as well. China might be hitting a speed bump, which makes it hard to be positive about demand."

Oil-market news:

Royal Dutch Shell Plc reported adjusted first-quarter earnings of $3.75 billion, compared with $1.55 billion a year earlier. U.S. shale driller Chesapeake Energy Corp. posted its first quarterly profit since 2014 and braced shareholders for a production surge in the second half of the year as new natural gas and oil wells come online. Pemex is producing more gasoline and diesel at its six refineries across Mexico, reducing fuel imports and leaving less oil available for export.

Bloomberg News by Mark Shenk