US crude contract fell below US$50 on Thursday for the first time since December. - AFP pic
LONDON: Oil prices steadied 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 down 10 cents at US$52.09 a barrel by 1445 GMT, after falling 1.7% on Thursday and 5% the day before in its biggest percentage decline in a year.
US crude was 5 cents lower at US$49.23 a barrel. The contract fell below US$50 on Thursday for the first time since December. US crude is on track for a drop of more than 7% this week, its biggest weekly fall for five months.
Market confidence faltered after news of another big rise in US crude inventories that have built steadily to record highs as US oil production has grown this year.
The Organisation of the Petroleum Exporting Countries and other exporters including Russia agreed last year to cut output by around 1.8 million barrels per day in the first half of 2017, but so far the move has had little impact on inventory levels.
“Steep price falls in the last two days amid building US inventories show that the market remains concerned about the supply-demand balance,” NAB group economist Phin Ziebell said.
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 and cast doubt on how long Opec will be willing to cut output if prices keep falling.
Senior Saudi officials told US oil firms in a closed-door meeting they should not assume Opec would extend output curbs to offset rising production from US shale fields, industry sources told Reuters on Thursday.
Analysts said they expected a period of market consolidation after the heavy falls this week, but there could be another sell-off if investors were forced to sell loss-making 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.
Morgan Stanley analysts said in a note to clients they still thought Brent crude would end this year higher, at around US$62.50, and reach US$75 by end-2020. - Reuters