Oil prices fell more than 2 percent on Friday after a consultant forecast a rise in OPEC production for July despite the group's pledge to curb output, reigniting concerns the global market will stay awash with crude, APA reports quoting Reuters.
Both Brent and U.S. crude tumbled more than a dollar a barrel and were headed toward weekly losses of more than 1.3 percent after Petro-Logistics said OPEC crude production would rise 145,000 barrels per day (bpd) this month. Petro-Logistics, which tracks OPEC supply forecasts, said this would take the group's combined output above 33 million bpd.
Higher supply from Saudi Arabia, the United Arab Emirates (UAE) and Nigeria would drive this month's gains, it said.
Benchmark Brent crude futures LCOc1 were down $1.03 or around 2.1 percent at $48.27 a barrel at 1:17 p.m. (1717 GMT) while U.S. West Texas Intermediate (WTI) crude futures CLc1 traded at $45.89 a barrel, down $1.03 or 2.2 percent.
OPEC and some non-OPEC states, such as Russia, have been trying to cut production 1.8 million bpd through the end of March 2018.
The UAE energy minister, whose country's oil output has been rising, said he was committed to the output cut and he hoped the deal would have a significant impact in the third and fourth quarters.
"We have the OPEC meeting in Russia on Monday and that’s going to be top of mind," said Dan Katzenberg, Senior Exploration and Production analyst at Baird and Co in New York.
The meeting gathers several ministers from OPEC and non-OPEC member countries in St. Petersburg. Kuwaiti Oil Minister Essam al-Marzouq, whose country heads the joint ministerial committee, said attendees would discuss continuing the production cuts.
The committee, known as the JMMC, can make recommendations to adjust the deal if needed, but analysts expressed skepticism that the group will address rising production from Nigeria and Libya, two OPEC members exempted from the cuts.
"There’s no expectation. ..that there’s going to be anything of substance in that meeting," said Katzenberg.
"Libya and Nigeria won't be too enthusiastic to cap their production," said Frank Schallenberger, head of commodity research at LBBW.
The discount of U.S. crude futures front-month versus the second-month CLc1-CLc2 briefly fell to just 12 cents per barrel during the trading session, the lowest since December 2014. This makes it less profitable for speculators to buy oil, sell it forward and store it in the meantime.
U.S. oil drillers cut rigs for a second week since January, with producers cutting one rig in the week to July 21, Baker Hughes said. Analysts said the decline was likely a pause in a drilling recovery expected to continue through at least 2019.