The Organization of the Petroleum Exporting Countries (OPEC) is expected to start slashing oil output next month to avoid a supply glut as the production of oil outweighs demand. West Texas Intermediate crude (WTI) fell $3.37, or 6.2 percent, to $51.26 after briefly sliding about 7 percent below $51 a barrel in light trading due to the Thanksgiving holiday.
So far, the prospect of the Middle East-dominated group orchestrating a fresh round of supply cuts has done little to prop up crude futures. Brent crude is down by about a fifth this month, putting it on course for its biggest one-month decline since late 2014.
Oil prices slumped up to almost 8 per cent to the lowest in more than a year on Friday, posting the seventh consecutive weekly loss, amid intensifying fears of a supply glut even as major producers consider cutting output.
Brent Crude is expected to average $75.50 a barrel next year, according to an S&P Global Platts survey of 11 top banks and oil brokers, who see OPEC cutting oil production by at least 1 million bpd and oil demand growth still healthy despite signs of weakness.
USA crude oil production also stayed at a record 11.7 million barrels per day (bpd), the EIA said. During the session, the benchmark dropped to $58.41, the lowest since October 2017.
The downtrend in oil prices has most definitely taken "some by surprise", Tamas Varga, senior analyst at PVM Oil Associates, said in a research note published Friday.
"The question is now how much longer bears are able to keep firing". The International Energy Agency expects non-OPEC output alone to rise by 2.3 million bpd this year, up from its forecast six months ago of 1.8 million bpd.
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Demand for next year is expected to grow by 1.3 million barrels per day.
Analysts at Morgan Stanley believe there are "compelling arguments" on either side when it comes to the OPEC alliance considering whether to implement production cuts from December 6.
Although the Organization of the Petroleum Exporting Countries is expected to curb output, rising USA oil supply has fueled persistent concerns about a global surplus.
"In that scenario, Brent prices likely recover back into the $70s ..."
"The declining trend was reversed again when Brent crude oil prices increased on November 12 on an announcement by Saudi Arabia that it would cut its exports by 500,000 barrels per day in December, and speculations that the Opec will slash output in 2019".
"Outside of a few better positioned companies, demonstrating free cash flow will be challenging at current oil prices, ' Hanold said".
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