Oil prices trimmed losses on Friday, having fallen more than 3 percent at one stage, the day after skidding to five-month lows as mounting concerns about global oversupply wiped out price gains since OPEC sealed a landmark accord to cut output.
U.S. West Texas Intermediate (WTI) crude oil futures were trading at $44.92 per barrel at 0716 GMT, down 60 cents or 1.3 percent, after a more than 4 percent drop the previous session.
WTI futures are now at their lowest since Nov. 14, below levels when the Organization of the Petroleum Exporting Countries (OPEC) and other producers agreed cuts late last November in a bid to drain a supply glut and boost prices.
Brent crude futures, the international benchmark for oil prices, were at $47.88 per barrel, down 50 cents or 1 percent from their last close. Prices fell to as low as $46.64, the lowest since Nov. 30. Brent tumbled back below $50 in the previous session.
At their intraday lows, Brent and WTI were heading for their largest two-day percentage loss since February 2016.
“It is now-or-never for oil bulls,” said U.S. commodity analysis firm The Schork Report on Friday. “They either put up a defense here or risk further emboldening the bears for a run at the $40 threshold (for WTI).”
Doubts that the OPEC-led cuts, even when fully implemented, will be deep enough to draw down bloated storage levels around the world are also weighing on prices.
Both Brent and WTI futures are down around 17 percent for the year so far despite the OPEC effort to support prices.
Neil Beveridge, senior oil and gas analyst at AB Bernstein in Hong Kong said in a note to clients on Friday that, “So far OPEC’s strategy to draw down inventories has not worked…It seems obvious to us that OPEC will need to keep the cuts in place for longer than the next six months if their strategy is to have any chance of success.”
Crude is now back to levels last seen before OPEC and other producers 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.
Other analysts agreed the steep price falls would likely force OPEC members to extend production cuts later this month, but they said the prospect of deeper cuts appeared slim.
“This collapse seems to be due to stops being hit. However I feel it is a bit strange so close to (an) OPEC…meeting where a rollover seems likely,” said Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore.
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.
OPEC is scheduled to meet on May 25 to decide whether to extend the cuts.
“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.
Traders also pointed to soaring U.S. oil output, up more than 10 percent since mid-2016 to 9.3 million bpd, levels not far off top producers Russia and Saudi Arabia.