Oil prices tumbled more than two per cent on Friday, notching the biggest weekly decline in more than a month on mounting evidence that U.S. production and inventory growth were offsetting OPEC's attempts to reduce the global crude glut.
Brent futures settled at US$51.96 a barrel, down US$1.03, or two per cent at the market's close. U.S. crude futures ended at US$49.62 a barrel, down 2.2 per cent, or US$1.09.
Volumes were heavy, with more than 665,000 WTI futures changing hands, surpassing the daily average of 525,000 contracts.
For the week, Brent fell seven per cent, while U.S. crude lost 6.7 per cent. It was the largest percentage drop for both benchmarks since the week of March 10, when rising concern about the supply glut undermined big bets on an oil rally.
Those speculative bets have been on the rise again. On Friday, the U.S. Commodities Future Trading Commission (CFTC) showed total long positions in U.S. crude rose in the week to April 18 to their highest in more than a month at 355,077 contracts. But oil has sagged in recent days, much as it did in March.
Many in the market still expect the Organization of the Petroleum Exporting Countries (OPEC) to renew its production cuts for another six months. On Friday an OPEC and non-OPEC member technical committee recommended extending cuts of almost 1.8 million barrels per day (bpd) at the upcoming May 25 meeting.
Still, shipment data shows more oil transiting world oceans than when cuts were put in place.
“The reason that we’re seeing the selloff today and really for this week has been related to the fact that we’re seeing higher waterborne imports arriving from the Middle East,” said Matt Smith, director of commodity research at Clipperdata.
“We should continue to remain well supplied at least over the next few weeks."
In addition, Russia's Energy Minister Alexander Novak declined to say whether Russia would adhere to an extension, saying global stocks were declining.
Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB, does not expect OPEC to roll over its cuts, saying it could potentially leave the cartel vulnerable to "more stimulus of the U.S. shale oil sector."
U.S. production, already at its highest since August 2015, looks likely to keep rising. U.S. drillers added rigs for a 14th consecutive week, Baker Hughes said on Friday.