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.
Prices also failed to strengthen after Saudi Arabia Minister Khalid al-Falih said on Thursday the cuts by the OPEC and non-OPEC producers could be extended beyond June if oil stockpiles stayed above long-term averages. The global crude oil benchmark, the Brent crude has declined by 4.30% to around $50.10 per barrel.
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However, most of the investors that had expected oil prices to book decent gains in response to the output cuts would have had their hopes dashed in the last couple of weeks.
"If you make it through this next OPEC compliance meeting and we don't have further jawboning by the Saudis and Russian Federation, or more compliance, I think that you have room to grow on the short side, which is worrisome", Brent Belote, founder of Cayler Capital LLC, which manages $5 million in oil-related assets, said by telephone. Surprisingly, Saudi Arabia raised oil production to 10.01 million bpd from 9.74 million bpd in January.
As is invariably the case, the energy markets are exerting a strong pull on the broader economy as attention begins to turn away from the Federal Reserve and interest rates. Even though banks including Morgan Stanley, Bank of America Corp. and Citigroup Inc. expect higher prices later this year, investors have been closing their bets on a rally since late February. OPEC's next meeting is billed to hold on May 25 in Vienna, Austria and analysts are already speculating on the possibility that OPEC will deepen its cuts above 1.2 million barrels or extend the cuts beyond six months.
US oil output has surged to over 9.5 million barrels per day from 8.5 million barrels per day in June of the previous year.
The first issue that has dragged oil prices down is that US inventories have continued to rise year to date.
"An extension is needed to balance the market", an OPEC delegate said.
In other related vegetable oils, soybean oil on the Chicago Board of Trade climbed as much as 0.9 percent, while the September soybean oil contract on the Dalian Commodity Exchange rose up to 0.8 percent. Brazil and Canada will increase by a higher level of 260,000bpd; Kazakhstan by 140,000 and smaller non-Opec countries in Africa will add several thousand barrels.
The broader macro backdrop has proved helpful for gold, as demand for the metal from the jewellery industry has been lackluster, hitting a seven-year low, according to the World Gold Council. Until then, it will be hard for oil prices to break higher.