Oil prices fell on Friday in a sell-off following two sessions of strong rises and on caution ahead of a gathering of OPEC ministers next week in Algeria to discuss possible production cooperation to rein in global oversupply.
Brent crude oil futures were down 60 cents, or 1.26 percent, at $47.05 a barrel, at 0903 GMT.
U.S. West Texas Intermediate (WTI) crude oil futures were trading at $45.55 per barrel, down 77 cents, or 1.66 percent, from their previous close. Still, the benchmarks were on track to close the week higher.
While traders said that the declines were largely down to technical indicators and selling pressure following strong price gains in the previous two trading sessions, there are also looming supply additions from Nigeria and Libya that could help cap prices in the near term. “You have both planned increases in production – ie, Iran – and a decrease in unplanned outages,” said Hamza Khan, head of commodity strategy at ING Bank. “Add that together and you’ve got a healthy amount of oil coming into the market. It’s hard to see prices above $50 per barrel, or even close to it.”
This week, export plans for Nigeria’s Forcados crude oil emerged for the first time since a pipeline attack in February shut down the stream, while Libya exported its first cargo from the port of Ras Lanuf since 2014. Both are adding to OPEC’s record production of 33.5 million barrels, and to global production that has exceeded consumption almost without interruption since mid-2014.
OPEC could see a new push to clinch a first deal to curb output since 2008 next week when group members meet informally in Algeria next week. Although most market observers say an agreement to freeze output levels is unlikely, analysts said that some form of cooperation among exporters, which could at least prevent production from ballooning further, was possible.
ANZ bank said on Friday that it did not expect a formal deal, but added that “discussions between Saudi Arabia and Iran this week suggest they are keen to get something done…which raises the possibility of a sharp reaction to the upside in prices if an agreement is reached.”