Oil prices fell on Friday after Saudi Arabia and Russia said they are discussing easing the crude supply cuts that have boosted oil prices in the past 18 months.  Anadarko photo.

Oil prices down over 3 per cent

Oil prices tumbled over 3 per cent on Friday after Saudi Arabia and Russia announced they are considering easing supply curbs under the OPEC supply cut agreement.

By 2:53 p.m., EDT, benchmark Brent had fallen by 3.08 per cent, or $2.43/barrel to $76.40.  Last week, Brent hit its highest mark since late 2014 at $80.50/barrel.  This week, Brent is on track to lose about 3.1 per cent, the largest weekly percentage decline since early April.

US West Texas Intermediate 4.10 per cent or $2.90/barrel to $67.81.  WTI had enjoyed six weeks of gains and is now expected to drop about 5.1 per cent this week, the biggest loss since early February.

The discount for WTI compared to Brent hit $8.53, the widest since May 17 and close to levels last seen three years ago.

The Canadian Crude Index dropped 6.47 per cent or $3.24/barrel to $46.84.

While attending a Russian economic forum in St. Petersburg, energy ministers from Russia, Saudi Arabia and the United Arab Emirates met to review the terms of the OPEC supply cut agreement which was implemented in January 2017.

The three officials discussed boosting crude production by about 1 million barrels per day, which would mostly compensate for Venezuela’s decline in output.

A decision on a possible increase in OPEC supply will be made when the cartel meets in Vienna on June 22-23.

“Different options will be put forward. But, it is likely that this will be a gradual easing,” Alexander Novak commented on the Russian energy ministry website on Friday.

Saudi Arabia’s Energy Minister Khalid al-Falih agreed.  He said easing of the restrictions on production levels would be measured to avoid shocking the market.

The move comes after US President Donald Trump tweeted that OPEC had “artificially” raised oil prices.

The OPEC supply cut agreement has rebalanced the oil market, even though US crude production has risen to record levels.  The US Energy Information Administration reports that in February, production in the United States rose to a record high 10.3 million barrels per day (b/d).

Also on Friday, Baker Hughes data showed the US oil rig count rose by 15 to 859, the highest since March 2015.  The Canadian oil rig count fell by 3 to 35, five fewer than this time last year.

Derek Rollingson, portfolio manager of the ICON Energy Fund told Reuters that Friday’s drop in oil prices could also be due to thin trading prior to the US Memorial Day holiday weekend.

“It’s the last Friday before a long weekend and the volume has a tendency to go down and with lower volume there’s always a chance of higher volatility,” Rollingson told Reuters.