Oil prices plunged more nearly 5 percent on Thursday after OPEC and other major exporters extended their current deal to limit oil production for nine months, disappointing investors who were anticipating deeper cuts.
OPEC and other major producers, including Russia, will roll over their six-month deal to remove 1.8 million barrels a day from the market through March 2018. Investors had hoped the cartel might reduce output even further to drain a global glut that has depressed the market for almost three years.
Brent crude oil plunged $2.52, or 4.7 percent, to $51.44 a barrel by 2:36 p.m. ET (1836 GMT). U.S. West Texas Intermediate (WTI) crude futures ended Thursday’s session down $2.46, or 4.8 percent, at $48.90.
Crude oil futures fell sharply lower around midday, after paring losses throughout the morning.
Michael Cohen, head of energy markets research at Barclays, said the market may have been looking for “the icing on the cake,” such as deeper output cuts or limits on exports.
“When those things weren’t included, then this kind of movement happens. We remain constructive on oil prices for next couple months as inventories draw down,” he told CNBC in an email.
Khalid Al-Falih, Saudi Arabia’s energy and industry minister, said he was not concerned by daily market moves during a press conference following OPEC’s meeting.
Still, energy consultancy Wood Mackenzie said keeping existing oil output at current levels for another nine months would result in a 950,000 barrels per day production increase in the United States, thus undermining OPEC’s efforts to balance supply and demand.U.S. oil production has already risen by more than 10 percent since mid-2016 to more than 9.3 million bpd as drillers take advantage of higher prices and the supply gap left by OPEC and its allies.
Investors are also nervous about