Official data showed crude inventories in the United States, the world's top oil consumer, fell sharply last week as refining and exports surged to record highs.
Futures slumped as much as 3.4 percent in NY and Brent crude in London slid below $50 a barrel.
US West Texas Intermediate (WTI) crude futures traded at $48.70, down 96 cents, or two per cent.
Both contracts were on track for weekly losses of at least 4 per cent.
President Donald Trump has vowed to provide extra support for USA oil production and is widely expected to pull the United States out of a landmark global climate accord.
Jeffrey Halley, a senior market analyst at OANDA [Foreign exchange company] says that this could lead to a drilling free for all in the U.S.
Oil prices dropped on Friday amid worries that U.S. President Donald Trump's decision to abandon a global climate pact could spark more crude drilling in the United States, stoking a persistent glut in global supply.
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Bill Cosby leaves the Montgomery County Courthouse during his sexual assault trial , Friday, June 16, 2017, in Norristown, Pa . It continued, "We are confident that these proceedings have given a voice to the many victims who felt powerless and silenced".
The bad news is US crude production rose to 9.34 million bpd last week, up almost 500,000 bpd from a year ago.
As OPEC and other major producers cap their production, analysts see US crude output continuing to trend higher as long as global prices stay above $40, a threshold at which many large USA oil companies can produce at a profit.
USA producers have become a key alternative source of supply as their output - largely due to shale oil - has soared by 10 percent since mid-2016 to 9.3 million bpd C-OUT-T-EIA, close to Saudi Arabia's and Russia's levels.
Investors pulled the classic "buy the rumor, sell the news" move following OPEC's decision to extend production cuts for nine months.
November's deal between the Organization of the Petroleum Exporting Countries and non-OPEC members like Russian Federation has been slow to take hold, as many nations sold inventory out of storage before truly cutting exports.
Faced with a lingering glut, OPEC last week discussed reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high, sources told Reuters.
Data released Thursday by the U.S. Energy Information Administration showed that commercial crude inventories fell by 6.4 million barrels in the week to May 26, compared with analyst expectations for a decrease of 2.5 million barrels. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns.
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