Brent oil tumbled below $50 on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump’s decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut.
Benchmark Brent crude futures <LCOc1> were trading at $49.67 a barrel at 0849 GMT, down 96 cents from the previous close.
U.S. West Texas Intermediate crude <CLc1> futures fell 95 cents to $47.41 per barrel.
Both contracts were on track for weekly losses of close to 5 percent.
The U.S. withdrawal from the landmark 2015 global agreement to fight climate change drew condemnation from Washington’s allies – and sparked fears that U.S. oil production could expand even more rapidly.
“This could lead to a drilling free-for-all in the U.S. and also see other signatories waver in their commitments,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.
He added that the move could complicate the market outlook in a way that “would not be favorable to oil prices”.
U.S. crude production last week already stood nearly 500,000 barrels per day (bpd) above the year-earlier level, straining OPEC’s efforts to drain a global overhang.
A week ago, the Organization of the Petroleum Exporting Countries and a number of non-OPEC producers met in Vienna to roll over a deal to cut 1.8 million bpd from the market for a further nine months, until March 2018.
But oil prices tumbled after the agreement was reached, as some had hoped for deeper cuts.
On Friday, Igor Sechin, chief of Russia’s largest oil producer, Rosneft, said U.S. oil producers could add up to 1.5 million bpd to world oil output next year.
Oil prices are down some 9 percent since OPEC’s May 25 decision to extend the cuts.
Rising output from OPEC members Nigeria and Libya, which are exempt from the deal, is also undercutting the attempt to limit production.
Faced with a lingering glut, OPEC last week discussed reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high, sources told Reuters.
Still, oil markets received some support from official U.S. data that showed the country’s crude inventories fell sharply last week as refining and exports surged to record highs.
Crude stockpiles were down by 6.4 million barrels in the week to May 26, compared with analysts’ expectations for a decrease of 2.5 million barrels.
Source: Reuters (By Libby George; Additional reporting by Jane Chung in Seoul; Editing by Dale Hudson)