Global commodity prices fell sharply for the second day in a row with oil prices down to their lowest settlement levels since November 29, the day before OPEC announced a deal to curb production in an effort to balance the market.
Futures fell by about 4% on both sides of the Atlantic.
"Without additional investments, there will be 9.5-9.6 million barrels of oil in the U.S. per day, and the United States is unlikely to continue to more increase oil production volumes".
For the first time since March, the worldwide Brent oil price has slipped below $50 per barrel this morning, erasing gains since OPEC's production cuts kicked in this year.
"Therefore, it is important for the market to achieve such a balance of reserves and prices that would allow the oil industry to continue to develop in a more harmonious way", the analyst said.
Pugh believes Opec and Russian Federation are likely to extend the cuts by at least three months at the meeting.
"Now we are holding final negotiations on the matter with our partners and are inclined toward the extension", said Novak.
OPEC still has much to discuss.
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Even though the cartels production fell by 1.6 million barrels per day from its peak in November and fell for the fourth consecutive month in April, the increase in USA shale production, inventories and rig count have single-handedly offset the efforts of the cartel to push crude prices. But shale is on the comeback trail now, aided by technological advances and leaner business models that have allowed companies to pump profitably at far lower prices than before. Total volume traded was about 49 percent above the 100-day average.
U.S. crude fell 4.41% to $45.71 per barrel and Brent was at $48.66, down 4.19% on the day.
In London Brent crude slid below $US50 a barrel to its lowest level since November. The global benchmark crude traded at a $2.58 premium to July WTI.
U.S. equities also were lower, with losers led by the energy sector, which fell 2.24 per cent to its lowest since August.
"The market appears to have temporarily lost faith in ever seeing an impact of the OPEC cuts on inventories", Michael Cohen, head of energy commodities research at Barclays Plc in NY, said by telephone.
"The countries have been increasing their oil production without any control during 2-3 years, but trying to settle the market situation within six months", he said. USA crude stocks stood at 527.8 million barrels, only 7 million barrels from a record high.
Commodities declined as China's intensifying clampdown on financial leverage and increased regulatory scrutiny are seen curbing demand in the world's biggest energy consumer.
Prices that "overshot" to the mid-to-high US$50s after the output deal are now "back to reality" amid surging U.S. supplies, Shum said.
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