Brent crude futures, the international benchmark for oil prices, were at $48.41 per barrel at 0047 GMT, up 3 cents from their last close. Brent tumbled back below $50 a barrel in the previous session. U.S. West Texas Intermediate (WTI) crude oil futures were trading at $45.53 per barrel, up just 1 cent after a more than 4 percent drop the previous session.
These large drops put crude back to levels last seen before the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia 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 and prop up prices.
Traders said that the tumbling market was a result of soaring U.S. oil production, which has risen over 10 percent since mid-2016 to 9.3 million bpd, levels not far off top producers Russia and Saudi Arabia. Doubts that the OPEC-led cut, even when fully implemented, are deep enough to draw down bloated storage levels around the world are also weighing on prices.
“Oil prices tumbled amid concerns over rising U.S. production despite the high probability that OPEC members will agree to extend production cuts when they meet on May 25th, though 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.
ClipperData’s commodity research director Matt Smith however said the effects of U.S. shale product increase has been overstated.
And even if OPEC was cutting production, the member nations were not cutting exports as global loadings of crude oil continue to rise, Smith told CNBC’s “Squawk Box” on Friday in Asia.
“(Shale production) is increasing but it is an incremental increase…If OPEC was going to materially cut exports to really try and reduce those inventories and really bring off that oversupply in the market, that will have a much starker impact,” he added.
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, as unsold oil from OPEC, North America, and also Europe is stored close to Asia’s main consumer hubs.
OPEC is scheduled to meet on May 25 at its headquarters in Vienna, Austria, to decide whether to extend the cuts. OPEC and non-OPEC oil producers look likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, three OPEC delegates said on Thursday, but they downplayed the chance of additional steps such as a bigger cut.