Oil Near Five-Month Lows

Oil prices fell to fresh five-month lows on Friday on concerns about a persistent glut despite assurances from Saudi Arabia that Russia was ready to join OPEC in extending supply cuts.

Benchmark Brent also fell 3% to below $47 per barrel, its lowest since Nov 30, which was the date the Organization of Petroleum Exporting Countries triggered a rally when it said it would cut production in the first half of 2017. US West Texas Intermediate crude oil futures fell more than 3% in early trading to below $44 per barrel, the lowest since Nov 14. It fell 4% on Thursday, Reuters reported.

OPEC sources said on Thursday that OPEC was likely to extend cuts when it meets on May 25 but said a deeper cut was unlikely. OPEC and non-OPEC states initially agreed to cut 1.8 million barrels per day in the first six months of 2017.

Brent traded volumes on Thursday reached an all-time high of nearly 542,000 contracts suggesting hedge funds had accelerated cuts in their long positions.

"It is now-or-never for oil bulls," said US commodity analysis firm The Schork Report. "They either put up a defense here or risk further emboldening the bears for a run at the $40 threshold (for WTI)."

Both Brent and WTI futures are down about 17% for the year so far despite the OPEC effort to support prices. The benchmarks are trading around levels last seen before the joint deal to cut output was announced by OPEC and non-OPEC states.

"So far OPEC's strategy to draw down inventories has not worked," Neil Beveridge, senior analyst at AB Bernstein in Hong Kong, wrote. "It seems obvious to us that OPEC will need to keep the cuts in place for longer than the next six months if their strategy is to have any chance of success."