Oil prices weakened on Friday in international markets and are on track for the largest weekly decline in the past month, due to doubts that OPEC’s production cuts will succeed in restoring balance to an oversaturated market. In the London market, the price of a barrel fell by 12 cents compared to the previous close, to $52.87, and is on track for the largest weekly drop of 5.4 percent since the week ending March 10.
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In the U.S. market, a barrel traded at a price 10 cents lower than Thursday’s close, at $50.61. It is on track for a weekly decline of 4.8 percent, also the largest since March 10.
Saudi Arabia and Kuwait, key members of the Organization of the Petroleum Exporting Countries (OPEC), have stated that they want to negotiate an extension of production limits for the second half of this year with producers outside the cartel. However, Russian Energy Minister Alexander Novak declined to say whether the largest oil producer would agree to an extension before the joint meeting on May 25, noting that global stocks are decreasing. – The situation has gradually improved since the beginning of March, emphasized Novak.
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Market data also indicate that the two-year average price of a barrel for futures contracts has fallen by more than $4 since January, to around $54.10 per barrel. The situation is exacerbated by some producers not included in the production cut agreement, who are increasing their exports.
Thomson Reuters Eikon data showed that in April, 48 million barrels of crude oil were transported across the oceans, which is 5.8 percent more than in December.
– The continued growth of U.S. shale production continues to sabotage OPEC and other producers’ efforts to stabilize the oversaturated market, stated Lukman Otunuga from the brokerage firm FXTM.
U.S. production has jumped nearly 10 percent since mid-2016, to 9.25 million barrels per day, which is close to the exports of leading global producers, Saudi Arabia and Russia.
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The CEO of French Total warned earlier this week that oil prices could fall due to further increases in production in the U.S.
– Cuts, even if extended, will not change much, is pessimistic Sukrit Vijayakar from the consulting firm Trifecta, adding that increased crude oil stocks are the main reason for oversaturation. OPEC announced on its website that the price of a barrel of its reference basket of oil was $50.48 on Thursday, which is $1.40 less than the previous trading day.
