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Oil prices dropped by almost 5% on Thursday, with expectations for a recovery in Libyan crude production and rising U.S. output sending prices back to levels they hadnt seen since before the OPEC output cut deal in November.

The possibility of power-sharing deal in Libya adds to the potential for more supply, said Phil Flynn, senior market analyst at Price Futures Group.

June West Texas Intermediate crude CLM7, -2.48% fell $2.30, or 4.8%, to settle at $45.52 a barrel on the New York Mercantile Exchange. July Brent crude LCON7, -2.15% on Londons ICE Futures exchange fell $2.41, or 4.8%, to end at $48.38 a barrel.

The United States Oil Fund LP USO, -4.73% an exchange-traded product, dropped 4.5%.

Both WTI and Brent, marked their lowest settlements since Nov. 29the day before the Organization of the Petroleum Exporting Countries reached an agreement to cutback production levels.

Read: OPEC faces high-stakes decision as oil drops to 5-month low

For WTI, the $44 level marks key support, and if prices take that level out, they could drop to $38, said Flynn.

Two of the largest factions in Libya have made progress in reaching a deal to resolve the nations political and economic crises, BBC News reported late Wednesday. Clashes between armed groups had caused intermittent shutdowns of Libyas biggest oil field.

A unified Libya could reach 1.5 million [barrels a day] in a few months, and it is excluded from OPEC quotas, said James Williams, energy economist at WTRG Economics, who pegged current Libyan output at about 700,000 barrels a day.

Libya and Nigeria dont have set production limits under OPECs six-month agreement among members to cut output down by a total of roughly 1.2 million barrels from October 2016 levels. In additional to that, some major producers outside of OPEC, including Russia, agreed to cut about 600,000 barrel a day.

OPEC is set to decide whether to extend the pact into the second half of the year, when it meets on May 25 in Vienna.

Williams said Nigeria wants to extend its exemption from quotas, which is a signal it hopes to increase production.

The road to consensus on a new deal remains uncertain and bumpy as just one OPEC member rejecting an agreement would likely be enough to upend the entire effort because the rest of the group would quickly jump back into market-share-first mode by pushing their output back up to pre-cut levels.

That decision is complicated by growing production in the U.S., which isnt subject to the agreement.

U.S. government data released Wednesday showed that weekly domestic crude production rose and inventories fell less than expected, deepening skepticism that production cuts from the Organization of the Petroleum Exporting Countries and its allies arent making a dent in elevated global stockpiles.

On Nymex, after a 1.3% gain Wednesday, June gasoline RBM7, -1.39% fell 3.4% to $1.481 a gallon and June heating oil HOM7, -1.47% lost 4.2% to $1.412 a gallon.

Natural-gas futures extended earlier weakness after the EIA on Thursday reported a larger-than-expected weekly rise in U.S. natural-gas supplies.

Inventories rose by 67 billion cubic feet for the week ended April 28. Analysts polled by S&P Global Platts forecast an increase of 61 billion cubic feet.

June natural gas NGM17, +0.00% settled at $3.186 per million British thermal units, down 4.2 cents, or 1.3%.

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Oil prices drop 5% as Libya output risks ease - MarketWatch