Brent crude prices have rallied somewhat after plunging to below $47 a barrel this morning.
The turbulence comes after prices yesterday dropped to the lowest level since November 2016, when the Organisation of the Petroleum Exporting Countries (Opec) agreed to cut production in order to rebalance the oversupplied market.
At the time of publishing, global benchmark Brent crude was trading 0.72 per cent higher at $48.73 a barrel, while West Texas Intermediate (WTI) prices were 0.44 per cent higher at $45.72 a barrel.
Fears are growing that Opec and non-Opec producers' reductions are not doing enough to curb output as US stockpiles grow while the country's shale gas production rockets.
Analysts are expecting Opec to extend the agreement for another six months when the cartel meets later this month, and there appears to be a consensus emerging among nations involved in the original pact to extend the agreement beyond June, according to Saudi Arabia's Opec governor, Adeeb Al-Aama.
"What’s been interesting about this week’s slump in crude oil is that it has been largely ignored by equities. Investors have focused on earnings, the increasing likelihood of a Macron win in the French presidential election and a dialling down in geopolitical risk rather than the obviously negative effects the sell-off in crude is having on the energy sector," said David Morrison, senior market strategist at SpreadCo.
"However, it’s possible that this is changing now, particularly as we’re now seeing a modest recovery in precious metals. Yesterday’s near collapse in crude has done immense damage technically and prices really need to bounce sharply from here to restore confidence."
Meanwhile, Opec members' crude output was unchanged in April at 31.85m barrels per day, according to an S&P Global Platts survey released today.
"Opec is still showing high compliance with its production cut agreement, as increases in Angola and Nigeria were offset by declines from Libya and Iraq," the report said.
Herman Wang, Opec specialist at S&P Global Platts, said:
An extension to the production cut agreement is far from a done deal, with many details to be negotiated, including cut levels, exemptions and duration, amid an increasingly sceptical market. Opec still has much to discuss.