Investors fear that oil refineries could remain hobbled for weeks after snow storms in southern US states while OPEC+ supplies rise.
Oil prices slid by up to 2 percent in Asian trade, adding to overnight declines, on worries that refineries will take time to resume operations after the big freeze in southern parts of the United States, creating a gap in demand.
Investors were also concerned that supplies by the Organization of Petroleum Exporting Countries and its allies (OPEC+) were expected to rise.
“The market was ripe for a correction and signs of the power and overall energy situation starting to normalise in Texas provided the necessary trigger,” said Vandana Hari, the founder and CEO of research firm Vanda Insights.
US West Texas Intermediate (WTI) crude futures fell $1.14, or 1.9 percent, to $59.38 a barrel at 04:21 GMT, after declining 1 percent on Thursday.
Brent crude futures dropped $1.03, or 1.6 percent, to $62.90 a barrel, after declining 0.6 percent on Thursday.
Both benchmark contracts rallied to 13-month highs on Thursday driven by the historic freeze in southern states in the US. While analysts estimate the extreme cold has shut in as much as one-third of US crude production, attention has now turned to the effect of the big freeze on refiners.
The lack of demand from Texan refiners will likely lead to a build-up in crude stocks over coming weeks, even though about 3.5 million barrels per day (bpd) of US crude oil production has been shut, ANZ Research said in a note.
Citi analysts said in a note that some US refineries might bring forward about 500,000 bpd of maintenance work normally scheduled for the northern hemisphere spring over next month, ahead of the summer driving season.
US crude stockpiles fell more than expected in the week to February 12, before the freeze, with inventories down by 7.3 million barrels to 461.8 million barrels, their lowest since March, the US Energy Information Administration reported.
Attention is also turning to a looming increase in crude oil supplies from OPEC+ countries.
OPEC+ sources said that the group’s producers are likely to ease curbs on supply after April given the recovery in prices.
The US said it was ready to talk to Iran about both nations returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons.
While the thawing relations could raise the prospect of reversing sanctions imposed by Trump, analysts did not expect Iranian oil sanctions to be lifted anytime soon.
“It’s going to be a long road,” said Hari referring to the US-Iran negotiations.