Oil prices rebounded to rise more than 1 percent on Friday, but ended the week nearly 3 percent lower after an OPEC-led decision to extend production curbs did not go as far as many investors had hoped. Trading, however, was light after Thursday's heavy sell-off and ahead of the long weekend break in the United States and Britain. Brent futures settled up 69 cents to $52.15 a barrel, or 1.3 percent, after hitting a session low of $50.71.
US West Texas Intermediate (WTI) crude futures settled at $49.80 a barrel, gaining 90 cents or 1.8 percent, after hitting an intra-day low at $48.18. On Thursday, the Organization of the Petroleum Exporting Countries and key producers pledged to extend a six-month deal to cut output by 1.8 million barrels per day (bpd) by another nine months until the end of the first quarter of 2018. Crude prices plunged 5 percent after the decision as some market participants had priced in more aggressive output cuts from the OPEC-led group.
"I think it was kind of a knee jerk reaction, I don't think it was anything meaningful," said Antoine Halff, Director of the Global Oil Program at Columbia University. Volumes for Brent were down to 254,142 from Thursday's 464,495, while WTI volumes fell to 726,467 from 1.15 million trades, which was the highest since November 30 when OPEC first agreed to the cuts.
For the week, Brent oil futures were 2.7 percent lower and WTI declined 1.1 percent. Producers have expressed confidence that this plan will bring down crude oil stocks to their five-year average of 2.7 billion barrels. The oil market, however, has seen considerable growth in US crude production, which has risen 10 percent since mid-2016 to over 9.3 million bpd, close to the output of top producers Russia and Saudi Arabia.
US energy firms added oil rigs for a record 19 weeks in a row but the pace of additions has slowed with only two added this week, and the monthly total added falling to the lowest since October, according to Baker Hughes data. With US output rising steadily and fears that OPEC and its allies could raise production in 2018 to regain lost market share, many traders, including Goldman Sachs, already expect another price slump.
The start of US summer driving season, marked by the Memorial Day holiday on Monday, should be supportive with the number of Americans on the road this weekend forecast to hit a 12-year high this year, fuelled by a growing economy and relatively low gasoline prices. The American Automobile Association projected 34.6 million people will drive 50 miles (80 km) or more from home during the end-of-month holiday period, the most since 37.3 million in 2005 and a 2.4 increase from last year. "Hopefully driving season picks up," said James Williams, president of energy consultant WTRG Economics in London, Arkansas. "Hopefully the market is saved by the US driver this Memorial weekend."