Oil drops below $45 for first time since OPEC deal

While the market takes direction from USA inventories and rising production, investors are also monitoring whether producing countries have been complying with their 2016 deal to cut output around 1.8 million barrels per day (bpd) by the middle of the year.

Both benchmarks lost 4.9 percent Thursday, falling to their lowest level since November 30 - the day when OPEC members and Russian Federation agreed to cut their individual oil production to increase prices.

The US West Texas Intermediate benchmark dipped below $46 per barrel for the first time since late November.

Saudi Arabia's OPEC governor said on Friday there is an emerging consensus among OPEC and non-OPEC countries who took part in a global pact to cut crude output on the need to extend the agreement beyond June to help clear a supply glut.

The recent steep price fall would likely force OPEC members to extend production cuts later this month, but the prospect of deeper cuts appeared slim, analysts said.

OPEC on November 30, 2016 agreed on its first limit on oil output since 2008, a deal supported by some non-OPEC members, including Russian Federation and Oman.

Prices are still more than 50 percent below their peak in 2014, when surging shale output triggered crude oil's biggest price collapse in a generation and left rival producers, such as Saudi Arabia, scrambling to protect their market share.

The oil price surge saw United States shale production rekindled and output is up a massive 468,00 barrels a day to 9.239 million barrels a day. Brent crude, the standard for global oils, fell $2.75 to $47.05 a barrel in London. Yet, oil prices continue sliding, proving the point that US production is contributing to lower prices.

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At 527.8 million barrels, the inventory levels are still 3% higher compared to the same time a year ago.

USA crude production rose to 9.29 million barrels last week, the highest level since August 2015, according to the Energy Information Administration.

OPEC is scheduled to meet on May 25 at its headquarters in Vienna, Austria, to decide whether to extend the cuts.

"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. Oil recovered some of its losses later Friday, trading 0.5% lower at around $45.30 by late afternoon in Asia.

USA shale producers have increased production much faster and with greater volumes than expected as production costs were cut sharply in the low-price era and technology has continued to enhance efficiency of production, noted Nordea Bank.

To be sure, some OPEC delegates have raised the possibility of a larger supply cut and others have said the existing agreement could be tweaked.

Shares of US -based oil and natural gas producers were crushed, despite a spate of unexpectedly positive first-quarter profit and production reports.

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