US oil prices plunged the most in six weeks on Wednesday after USA government data showed supplies remain plentiful. According to Bloomberg, 20 companies had borrowed more than two-thirds of their credit line limits amid a liquidity crunch last fall.
With the next Opec policy meeting a little more than a month away, individual countries seem weighing their options with regard to extending production cuts. Light, sweet crude futures for delivery in June CLM7, -0.02% were down 4 cents, or 0.1%, at $50.67 a barrel on the New York Mercantile Exchange. "Bellwether Brent time-spreads have been counter-seasonally widening".
Russian Federation and other producers agreed to cut production by 1.8mn barrels per day (bpd) for six months from January 1 this year to support the market. Citibank and Goldman Sachs are among those expecting mid-$60s per barrel oil if that happens.
"If they're (OPEC) so busy complying, how come we're taking so much extra inventory?"
Novak said that current oil prices are reflective of the oil market situation, with benchmark Brent prices now around $53 a barrel.
The International Energy Agency said last week that inventories in industrialised countries were still 10 percent above the five-year average, a key gauge for OPEC. But the group was a victim of its own success, as those same spreads forced crude out of storage, flooding an already weaker physical market with supply.
"The sell-off occurred an hour after the release of this USA data and accelerated as prices traded through their 50 and 100 day moving averages, a repeat of the March 7 and October 29 sharp decline in prices", the analysts wrote.
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Among the factors behind the weakness, traders cited muted demand in Asia, saying Chinese independent refiners - known as "teapots" - have dramatically reduced buying after strong imports earlier this year. S. producers will increase output anew, potentially sending stockpiles higher again.
Crude futures edged lower on Friday, with investors focused on the US, where production is growing faster than had been anticipated.
This was primarily attributed to excessive stockpiles and refinery maintenance season, which in the USA led to a string of seven-figure inventories increases, making markets nervous.
Overall compliance with pledged cutbacks stood at 98 percent in March, a source said. Russia, which joined OPEC earlier this year in lowering production, said it was too early to say whether a roll-over will be needed.
Saudi Energy Minister Khalid al-Falih said consensus was growing among oil producers that a supply restraint pact that started in January should be prolonged after its initial six-month term.
Russian Energy Minister Alexander Novak says the oil market is improving with production cuts by OPEC and non-OPEC members.
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