Crude oil prices plunge sharply on Thursday

Hamid stated that only decisive action from OPEC will boost prices from current levels, which is constantly facing the challenges of increasing U.S. shale output.

OPEC and other key producers agreed to extend the ongoing supply cuts of 1.8 million barrels a day to March next year.

The agreement at a meeting in Vienna on Thursday to keep in place a reduction of 1.8 million barrels per day was not enough for traders and immediately sent crude prices plunging nearly five percent, which in turn dragged energy firms lower.

Brent for July settlement was at $51.08 a barrel on the London-based ICE Futures Europe exchange, 38 cents lower.

Oil prices rebounded to rise more than 1 percent on Friday, but ended the week almost 3 percent lower after an OPEC-led decision to extend production curbs did not go as far as many investors had hoped.

"The negative oil reaction to a 9-month OPEC production cut extension is a prime example of "buy the rumour, sell the fact". Opec originally increased production to lower the oil price, making fracking less cost-effective, so forcing shale oil producers out of business.

At the time, non-OPEC output was falling at a rate of about 700,000 barrels a day, while global demand was growing around 1.5 million barrels a day, year on year, and "visible inventories" were declining by roughly 1.2 million barrels a day, he said.

OPEC was under pressure from oil producers to reduce crude oil stockpiles from their current level at 3bn barrels to their long-term average of 2.7bn barrels.

However, OPEC and the other countries involved might not have agreed to cut production further as that could have proved beneficial for the American shale oil industry.

"We're starting the beginning of the summer driving season, there's a lot of hopes that are tied to an inventory draw from Memorial day to Labor day", he said. Falih informed that OPEC members Nigeria and Libya would still be excluded from cuts.

That could increase supplies and push down prices.

"Output in the US alone is projected by IHS Markit to rise by more than 900,000 bpd from the beginning of 2017 to the end of the year", Bahree said.

"Oil prices slumped this week as OPEC announced that it would rollover its current output cuts for another nine months", said the analysts.

With technological advances in the past few years making US shale oil profitable a much lower levels, the united OPEC-Russia front is feeling the squeeze, said Daniel Yergin, a Pulitzer Prize-winning author and leading oil analyst.

  • Zachary Reyes