"Oil has been unable to use the weaker United States dollar to continue its recovery rally from last week's three-month lows as rising U.S. production concerns continue to weigh upon the marketplace", said Henry Croft, research analyst at Accendo Markets.
US West Texas Intermediate (WTI) ended Thursday's trade 11 cents lower at $48.75/barrel, edging off a three-month low hit last Tuesday.
Oil for April delivery also moved down Rs 26, or 0.80 per cent lower to Rs 3,219 per barrel in 1,229 lots. May Brent crude LCOK7, -0.14% gave up 14 cents, or 0.3%, to $51.62 a barrel on the ICE Futures exchange in London.
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Oil prices have stayed in the $55-$60 range since the deal was implemented in January, with the increase in returns enticing United States' producers to raise cheap shale oil output.
After spending much of 2016 near multiyear lows, oil prices began to rally in late November as it became clear that OPEC would finally cut production to address a long-standing oil glut.
Meanwhile, the deal between Opec and non-Opec producers, which was agreed late a year ago and aimed to curb production, appears to be having little effect on the glut at the moment, with three of the last four weeks showing substantial inventory increases.
A poll of market analysts showed on Friday that OPEC will have to extend its oil output curbs beyond June as a revival in crude production outside the group, specifically in the US, may scupper its efforts to erode an overhang of unused inventory.
OPEC next meets to decide output policy on May 25 in Vienna. However, U.S. shale producers can't continue to increase their output indefinitely. "A major threat to the market, whether a BAT or simple tariffs are enforced, could arise from diminished oil and product demand as protectionist policies are sure to weigh on economic growth". Brazil is not a part of the non-Opec group that agreed to production cuts. The EIA estimates that US WTI and Brent crude oil prices will average $53.5 per barrel and $54.6 per barrel, respectively, in 2017. This is more than 300 million barrels above the five-year average.
The bigger headwind to prices is also the re-emergence of shale output. Those bets, measuring futures and options positions, indicated that investors expected prices to rise.
Codelco, the world's largest copper miner, expects its copper production to be flat over the next few years.