The Organization of the Petroleum Exporting Countries and other exporters including Russia agreed in November to cut output by around 1.8 million barrels per day (bpd) in the first half of this year.
Oil prices recovered a little on Friday after dropping to their lowest in more than three months, pressured by heavy oversupply despite OPEC-led production cuts. Brent crude oil was up 15 cents at $52.34 a barrel by 0900 GMT, after falling 1.7 percent on Thursday and 5 percent the day before in its biggest percentage decline in a year.
US crude oil was up 15 cents at $49.43 a barrel. It fell below $50 on Thursday for the first since December. US crude is on track for a drop of more than 7 percent this week, its biggest weekly fall for five months. Market confidence failed after news of another big rise in U.S. crude inventories that have built steadily as US oil production has risen this year.
The Organization of the Petroleum Exporting Countries (OPEC) and other exporters including Russia agreed in November to cut output by around 1.8 million barrels per day (bpd) in the first half of this year, but so far it has made little impact on inventory levels.
“Steep price falls in the last two days amid building U.S. inventories show that the market remains concerned about the supply-demand balance,” said NAB Group Economist Phin Ziebell. Crude oil inventories in the United States, the world’s top oil consumer, swelled by 8.2 million barrels last week to a record 528.4 million barrels.
US oil and gas drilling has also picked up, with producers planning to expand crude production in North Dakota, Oklahoma and other shale regions, while output has jumped in the Permian, America’s largest oilfield. That has undermined bullish sentiment generated by OPEC’s agreement to cut production, and cast doubt on how long OPEC will be willing to reduce output if prices keep falling.
Senior Saudi officials told U.S. oil firms in a closed-door meeting this that they should not assume OPEC would extend output curbs to offset rising production from U.S. shale fields, industry sources told Reuters on Thursday.
Analysts said they expected a period of market consolidation after the heavy falls this week with prices rising before another possible sell-off if investors were forced to shed loss-making futures contracts. “The market remains overwhelmingly long and any further weakness will force additional reductions,” Saxo Bank’s head of commodity strategy, Ole Hansen, told Reuters Global Oil Forum.