Oil Tumbles To 5-Month Low

Both benchmarks pared losses after Saudi Arabia's OPEC Governor Adeeb Al-Aama told Reuters that OPEC and non-OPEC nations were close to agreeing to extend a deal to curb production by 1.8 million barrels per day (bpd) for six months from January 1.

The precise trigger for the two-day sell off, which has loped more than 7% from global crude prices, is hard to pinpoint, but the downward slope has been evident since last month's OPEC report in which the cartel raised its supply forecast for non-members, thanks in part to a huge upswing in shale oil production. "It seems obvious to us that OPEC will need to keep the cuts in place for longer than the next 6 months if their strategy is to have any chance of success", Neil Beveridge, senior oil and gas analyst at AB Bernstein in Hong Kong said in a note to clients on Friday.

But ABN Amro warned that Opec may not expand the agreement, as oil prices gained less than expected in the first quarter this year and have triggered higher USA crude output.

Moreover, the recent EIA report on USA crude oil inventory declining only by 900,000 barrels as against market expectation of a 2.3 million barrel decline continue to weight down on market sentiments.

OPEC output has declined for several straight months while Russian Federation, the largest non-OPEC producer, has been trimming production since late 2016.

Brent crude, the global benchmark for oil, was trading at $48.54 per barrel on Friday, from over $50 only 24 hours ago. US crude production rose to 9.29 MMbpd last week, the highest level since August 2015, according to the Energy Information Administration.

U.S. crude production rose to 9.29 million barrels last week, the highest level since August 2015, according to the Energy Information Administration. U.S. crude fell as low as $US45.63, Brent touched $US48.54.

US output has been on the rise in recent months, touching production levels not seen since August 2015, according to Bloomberg.

In response, the Organization of Petroleum Exporting Countries is likely to extend the 1.2 million barrel-a-day cut agreed to in November for six months, according to Nigerian Oil Minister Emmanuel Ibe Kachikwu.

"Any likelihood of an increase in the level of cuts remains slim, with OPEC officials playing down this possibility", said James Woods, global investment analyst at Rivkin Securities.

Oil prices have sunk to their lowest level since November 2016 after Russian Federation said it hasn't yet made a decision about extending cuts.

West Texas Intermediate crude fell more than 5%, plunging below $US46 a barrel for the first time since last November.

Shares of energy companies followed futures lower.

Gasoline stocks rose 191,000 barrels, much less than the 1.3 million barrel gain predicted in a Reuters poll.

If OPEC and non-OPEC countries who are part of the production pact do not agree on a quota extension, WTI prices could drop back into the $30s, Williams said.

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