Oil prices finished on a mixed note Thursday, with West Texas Intermediate crude extending a decline after a drop of almost 4% a day earlier, on continued concerns about growing us crude production.
Leading Persian Gulf oil producers Saudi Arabia and Kuwait gave the clearest signal yet that OPEC plans to extend a deal with non-OPEC producers to curb oil supplies into the second half of the year.
Oil-producing nations are moving closer toward ending a global glut and re-balancing the crude market, and OPEC will decide next month whether to extend its cuts in output beyond June, the group's Secretary-General Mohammad Barkindo said, according to Bloomberg.
"OPEC seems more like a magician who is keeping the audience's attention fixed firmly on his hands (its production policy) while the actual trick takes place elsewhere (non-OPEC supply)", said Carsten Fritsch, oil analyst with Commerzbank. Many have been predicting a sustained rally and leaders of the Organization of the Petroleum Exporting Countries even came out this week to suggest further output cuts.
Still, Saudi energy minister Khalid al-Falih on Thursday said a preliminary agreement to continue cuts for another three or six months is within reach and could be approved at OPEC's next meeting on May 25.
The accord last year between OPEC, Russia and 10 other producers was meant to boost prices by eliminating an inventory surplus of about 300 million barrels over the five-year average - equivalent to three days of global oil production.
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Mohammed Al Rumhy, Oman's energy minister, said he expected the entire non-Opec group to agree to an extension, noting that Russian Federation and Iran have made preliminary pledges. "And what we agreed with our partners, countries that are outside OPEC, was an important agreement". "This is the main indicator for the success of the initiative", Falih said.
World oil demand growth in 2016 was kept broadly unchanged at 1.38 million barrels per day (mb/d), averaging 95.05 mb/d.
OPEC sources said an internal assessment was that without an extension, oil could slide to $30-40 a barrel.
Crude futures edged lower on Friday, with investors focused on the USA, where production is growing faster than had been anticipated. Crude dropped below $50 Friday on concerns that surging US production could undermine OPEC's efforts to reduce global supplies. But the fact they are still high could spook the market into a further selloff if OPEC doesn't extend its effort to counter USA production, analysts said.
However, inventory levels are hard to judge outside of the United States, as many countries do not release specific figures.
OPEC seems to be encouraged by the contribution of non-OPEC producers to the output cuts.
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