Crude prices reversed course and fell sharply in Asia on Friday with weekly rig count data expected to set the tone along with nonfarm payrolls as an indicator of broad economic health in the key U.S. market.
On the New York Mercantile Exchange crude futures for June delivery dropped 2.79% to $44.25 a barrel, while on London’s Intercontinental Exchange, Brent plummeted 2.50% to $47.17 a barrel.
Reports on Thursday said OPEC and non-OPEC oil producers look likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, but downplayed the chances of additional steps such as a bigger cut in the face of a massive supply response from the U.S. to higher prices.
That increased production will get a fresh weekly view later on Friday with the latest weekly rig count report. Last week, U.S. drillers added rigs for the 15th week in a row, data from energy services company Baker Hughes showed last Friday, implying that further gains in domestic production are ahead.
The U.S. rig count rose by 9 to 697, extending an 11-month drilling recovery to the highest level since August 2015.
Overnight, crude futures settled 5% lower on Thursday, wiping out the gains achieved since OPEC and other producers agreed a deal to cut production, as investors’ concerns about the glut in crude stockpiles heightened, ahead of the OPEC meeting on May 25.
Crude prices plunged to a session low of $45.31, just shy of the November 30. low of $45.22, the day OPEC and other producers including Russia agreed to cut output by about 1.8 million barrels per day (bpd) for a period of six-month months until June.
Despite, data from the Information Energy Administration (IEA), showing that 99% of the targeted cut has been implemented during the first quarter of 2017, oversupply jitters returned as producers, who are not part of the deal to curb supply, the U.S. in particular, ramped up output, which has dampened OPEC’s effort to reduce global supply.
Saudi oil chief Khalid al-Falih acknowledged last week, that the first quarter of cuts failed to stem the glut in supply to below the five-year average but hinted at the possibility of extending the supply-cut agreement beyond June.
OPEC is expected to decide at talks on May 25 whether to extend production the current deal to cut production for an additional six-months to the end of the year.
The slide came a day after the Energy Information Administration (EIA) revealed that U.S. crude stockpiles fell less than expected.
For the week ended April 26, the EIA said that crude oil inventories fell by 0.930 million, which was far less than expectations of a draw of 2.333 million barrels.
