Oil prices fell by as much as a further 3 percent on Friday, after prices had crashed to five-month lows in the previous session, as concerns about global oversupply wiped out all of the price gains since OPEC’s move to cut output. US West Texas Intermediate (WTI) crude oil futures were trading at $44.14 per barrel at 0335 GMT, down $1.39 or 3 percent, after a more than 4 percent drop the previous session. WTI futures have fallen below prices when the OPEC cuts were agreed in late November and are at their lowest since Nov. 14.
Brent crude futures, the international benchmark for oil prices, were at $47.05 per barrel at 0335 GMT, down $1.33 or 2.8 percent from their last close. Brent tumbled back below $50 in the previous session and is its lowest since Jan. 14. Brent and WTI are on track for their largest two-day percentage loss since February 2016.
“So far OPEC’s strategy to draw down inventories has not worked … It seems obvious to us that OPEC will need to keep the cuts in place for longer than the next 6 months if their strategy is to have any chance of success,” Neil Beveridge, senior oil and gas analyst at AB Bernstein in Hong Kong said in a note to clients on Friday.
Crude is now back to levels last seen before the Organization of the Petroleum Exporting Countries (OPEC) and other producers said they would cut output by almost 1.8 million barrels per day (bpd) during the first half of the year in a bid to tighten the market.
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Other analysts agreed the steep price falls would likely force OPEC members to extend production cuts later this month, but they said the prospect of deeper cuts appeared slim. “This collapse seems to be due to stops being hit. However I feel it is a bit strange so close to OPEC … meeting where a roll over seems likely,” said Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore.
Doubts that the OPEC-led cuts, even when fully implemented, are deep enough to draw down bloated storage levels around the world are also weighing on prices. Both Brent and WTI futures are down around 17 percent for the year so far despite the OPEC effort to support prices.
In a sign of ongoing oversupply, the amount of oil stored on tankers in Malaysia’s waters has surged again recently, after drawing down slightly in March and April. OPEC is scheduled to meet on May 25 to decide whether to extend the cuts.
“Any likelihood of an increase in the level of cuts remains slim with OPEC officials playing down this possibility,” said James Woods, global investment analyst at Rivkin Securities.
Traders also pointed to soaring U.S. oil output, up more than 10 percent since mid-2016 to 9.3 million bpd <C-OUT-T-EIA>, levels not far off top producers Russia and Saudi Arabia.
(Reporting by Henning Gloystein, Mark Tay and Roslan Khasawneh; Editing by Richard Pullin and Tom Hogue)