Oil prices took a sharp dip Friday, with Brent crude falling to $71.12 per barrel and WTI to $67.20. Concerns over a supply surplus and weak global demand continued to pressure the market despite OPEC+ extending deep production cuts through 2026.

OPEC+ Extends Cuts Amid Surplus Fears

Despite OPEC+'s decision to postpone output hikes and extend steep production cuts until the end of 2026, analysts predict a supply surplus next year due to sluggish demand, which led oil prices to fall by more than 1% on Friday and solidify weekly losses, Investing.com reports.

After losing 97 cents, or 1.4%, Brent crude futures finished at $71.12 per barrel. Futures for U.S. West Texas Intermediate crude oil fell $1.10, or 1.6%, to $67.20 per barrel.

While WTI fell 1.2% for the week, Brent fell almost 2.5%.

Prices were further driven down by the increasing number of oil and gas rigs deployed in the US this week, which suggests that production is on the rise from the largest petroleum producer in the world.

Rising U.S. Oil Rigs Impact Market Dynamics

Oil production increases will not begin until April, three months later than originally planned, and the complete unwinding of cutbacks will not take place until the end of 2026, according to a Thursday announcement by OPEC and its partners, sometimes known as OPEC+.

According to Bob Yawger, director of energy futures at Mizuho in New York, the market has been affected by weak global demand for oil and the expectation that OPEC+ will increase production in response to rising prices.

"They're just waiting for better pricing and once they get that, they're going to start jumping in again," according to Yawger.

Half of the world's oil production comes from OPEC and its allies, who were supposed to begin easing production cuts in October 2024. However, falling demand worldwide, particularly in China, a major petroleum importer, and increased production in other regions have caused them to repeatedly push back the plan.

Global Demand and Price Outlook Remain Uncertain

"While OPEC+'s decision to hold off strengthens fundamentals in the near term, it could be seen as an implicit admission that demand is sluggish," HSBC Global Research analysts stated.

On Friday, Bank of America released a note in which it predicted that oil demand growth will resume to 1 million barrels per day (bpd) in the following year, and that rising oil surpluses will cause the price of Brent to average $65 per barrel in 2025.

In the meantime, a letter from HSBC stated that the bank's previous estimate of a 0.5 million bpd oil market surplus has been reduced to 0.2 million bpd.

Brent has remained relatively stable at about $75/barrel for the previous 30 days as traders have taken into account mixed signals from China's demand and increased geopolitical tensions in the Middle East.

U.S. Rig Count Rises After Weeks of Decline

"The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic," PVM analyst Tamas Varga stated.

In its carefully watched report on Friday, energy services firm Baker Hughes stated that the U.S. rig count increased for the first time in eight weeks, which is another factor putting pressure on prices.

Oil rigs increased by five to 482, according to Baker Hughes, the highest level since mid-October, while gas rigs increased by two, reaching 102, the highest level since early November.

The overall number of rigs was still 37 lower, or 6% lower than this time last year, according to Baker Hughes, even if this week there was an uptick.

Oil continued to lose ground after a mixed U.S. jobs data revealed a robust hiring comeback but a small increase in the unemployment rate.