Oil drops on oversupply worries as Saudi Arabia, Russia delay meeting

Still, a move by Saudi Arabia to delay the release of its crude official selling prices indicates it is not eager to flood the market with cheap supplies before a potential agreement, said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.

"That's a pretty clear sign that they are open to cutting production in May," he said.

The kingdom delayed the release until Friday to wait for the outcome of the meeting between OPEC and its allies regarding possible output cuts, a Saudi source told Reuters.

Indicating the market too is expecting the supply glut to improve, prompt oil prices jumped last week and sharply narrowed their gap with future months .

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Oil prices could also firm as decades-low prices have already forced producers to cut output, CMC's McCarthy said.

"In the short term the low prices are very painful, but if it does lead to a lot of those players leaving the industry, the supply side of the equation will balance out," McCarthy said, referring to U.S. shale producers.

Rig counts in the United States fell by 62 last week, energy services firm Baker Hughes Co said on Friday, marking the biggest weekly drop in five years, as U.S. energy companies slashed spending on new drilling due to a coronavirus-related slump in economic activity and fuel demand.

Brazil's Petrobras has also doubled its oil output cuts to 200,000 bpd, or 6% of its total production.