Oil prices tumbled to their lowest level since November 2016 amid growing fears that the Organisation of the Petroleum Exporting Countries (Opec) is not doing enough to rebalance the oil market while US stockpiles rise.
Brent crude prices fell to an intraday low of $49.69 a barrel while West Texas Intermediate (WTI) prices traded at a $46.73 a barrel this afternoon.
"There’s been no let-up in the rout in crude oil today. The benchmark WTI contract is down close to 2.5 per cent this afternoon while Brent has slumped below $50. Both contracts trading at their lowest levels since late November last year, just after Opec and other major producers agreed to their 1.8m barrel per day output cut," said David Morrison, senior market strategist at SpreadCo.
Opec and non-Opec producers including Russia agreed to cut output over the first six months of 2017 to reduce the global supply glut, but high inventories in the US along with the country's rising shale production have kept a ceiling on price rises.
"Today’s sell-off accelerated after Russia said that there’s no decision to date on extending the production cut beyond June," Morrison said.
Analysts expect Opec to extend the deal for another six months when officials meet later this month.
"I do think as long as Opec maintains the cuts, the price will get some stability," Petromatrix analyst Olivier Jakob said.
Yesterday, data from the US Energy Information Administration (EIA) revealed weekly crude stocks fell by 930,000 barrels to 527.8m, which was less than half of the 2.3m barrel decline forecasted. Gasoline stocks, which have lately been driving prices, rose by far less than the 11.3m barrel gain analysts expected at just 191,000 barrels.