Oil price extends losses on oversupply fears

Oil price extends losses on oversupply fears

Oil prices have fallen further, adding to near 5% losses seen on Thursday trading, as concerns about a worldwide supply glut resurfaced.

Brent crude fell 1.8% at $47.49 a barrel, while US crude dropped 2.1% to $44.58 a barrel.

Oil is at its lowest level since November, when producers’ cartel Opec struck a deal to cut output.

Investors are worried that Opec nations will fail to rein in output further at their next meeting later this month.

Oil prices down by about 15% since the start of the year, despite Opec’s agreement in November which cut output by 1.8 million barrels a day.

Supply is still outpacing demand, with US oil production alone up by 10% since summer 2016.

It now pumps out some 9.3 million barrels a day – not far short of the two giant oil producing nations of Russia and Saudi Arabia.

‘Jittery’ market

Opec’s deal in November, and subsequent supply cuts agreed by other oil producing countries, helped to boost prices earlier this year, said David Hunter, an energy industry analyst with Schneider Electric.

But the market is getting a bit “jittery” as countries decide whether to extend those cuts, he said.

Opec and other oil nations are meeting on 25 May where they will discuss the success of the six-month cutback and whether it should be deepened.

Russia, one of the non-Opec countries to sign up to the cuts, gave mixed signals on Thursday about whether it would continue.

“While the cartel is expected to extend a self-imposed production cap by another six months, it will be a challenge to convince several non-Opec members to follow suit,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics.

“Persistent growth in US oil production … will also make extensions of the Opec cap beyond 2017 unlikely.”

‘Losing faith’

Data released on Tuesday indicated US crude stocks fell 930,000 barrels last week. Analysts had been expecting a drop of 2.3 million barrels.

The US data and some investors “losing faith with Opec” are not helping the oil price, said Abhishek Deshpande, an oil analyst at Natixis.

The fall in crude prices hit global energy and commodity stocks.

On Thursday, US oil giants Chevron and Exxon Mobil were two of the biggest fallers on Wall Street, dropping 2% and 1.3% respectively.

In early morning trade in London, shares in BP were down 1%.

Source: BBC News

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