Ole Hansen, an analyst at Saxo Bank, said the worst of the price capitulation is potentially over but there are multiple reasons behind the latest market weakness which will continue to weigh on prices.
After falling nearly 5 percent on Thursday, both contracts continued to collapse overnight with WTI falling to $43.76, its lowest since November 15, and Brent down to $46.64, its lowest since November 30 when the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production during the first half of 2017.
The relentless increase in USA output has overshadowed pledged output cuts by major producers. Even signals from Saudi Arabia and Russian Federation that they'll prolong the supply reductions haven't staunched the rout.More news: Former NBA player Brandon Roy shot, wounded in California
Even though flows have been choppy in recent months, the kingdom is now exceeding its compliance-agreed cut of 486,000 bpd, leading by example as the May 25 OPEC meeting approaches.
The minister marked a high level of discipline among the countries in terms of meeting their obligations on oil production cut deal and a good pace of growth in demand. "You can't say you want lower inventories, and after a few months give up".
"We feel that the (Opec) cartel has come to a fork in the road in which the current agreement will be abandoned or steps will need to be taken to double down on current efforts by increasing production curtailments", Ritterbusch said. He was echoing his Saudi counterpart Khalid al-Falih, who said on April 26 that there's a preliminary consensus to prolong the agreement with backing from other OPEC nations such as Kuwait and Iraq.More news: What James Conner brings to the Steelers
In November previous year, OPEC and other producers, including Russian Federation agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.
"The OPEC deal was doomed to failure from the very beginning", said Eugen Weinberg, head of commodities research at Commerzbank AG. "OPEC will find itself in the same position again in six months time, but non-OPEC would get more market share by then".
Global fuel stockpiles may have actually increased during the first quarter, the IEA estimates. USA inventories fell less than all 11 forecasts by analysts surveyed by Bloomberg. The strong U.S.jobs data failed to shake investors' bullishness toward the euro ahead of the second round of France's presidential election. "I think now this election is no longer an issue and the market is already starting to focus on new issues: inflation, the (euro zone) economy, and the USA data", said DZ Bank strategist Daniel Lenz. "I don't think they have many options".More news: Chelsea and Tottenham fight for EPL title