05 June, 2017
That's because USA shale oil producers have taken advantage of the uptick in prices since past year to ramp up production. That, in turn, is increasing supply and keeping a lid on price gains.
Global oil prices extended declines overnight as investors reacted to OPEC's decision yesterday in Vienna to extend an agreement among members and some non-member countries, including Russian Federation, that removes 1.8 million barrels of oil from the market each day for a further 9 months. The initial agreement would have expired next month.
During the meeting, Khalid al-Falih reportedly said, while the oil market is on its way to recovery, "more time is needed" before oil supplies can be expected to return to their five-year average.
Analysts criticised Opec's failure to make deeper cuts to production.
"We even considered options for higher cuts", he said during the Vienna meeting.
"All indications are that a nine-month extension is optimal".
Investors seemed to focus on that reality on Thursday, when they pushed the price of crude to levels seen before OPEC's meeting in November.
Global benchmark Brent fell 0.5 per cent to $51.18, after slumping 4.6 per cent overnight.
Ann-Louise Hittle, vice president at energy consultancy Wood Mackenzie said that the "decision in Vienna sends a signal of continued support for oil prices from OPEC which helps USA onshore drillers make plans" to further increase their production.
M - Kazakhstan supports the decision of the OPEC and non-OPEC countries to extend the oil cut deal and would continue to fulfill its commitments under the deal, the Kazakh Energy Ministry said in a statement on Friday. USA crude sank almost 4.8 percent on Thursday on disappointment that OPEC and the other producers weren't more aggressive in extending their output cuts.
Concerns remain that OPEC-led production cuts will only stimulate a further rise in output from the United States, where producers can operate at much lower costs.
OPEC announced the agreement to cut oil production in November, but surging USA output, weak fuel demand and persistently robust OPEC exports in the first half of the year offset those reductions.