Oil prices extend losses as output freeze hopes fade
After breaking above $40 in March on expectations for the Russia-Saudi Arabia-led talks, the commodity has tumbled in recent weeks
The April 17 Doha meeting aims to agree to cap output at January 2016 levels, but analysts say only a production cut can lead to a sustained recovery in prices.
The losses were fanned Friday when Saudi deputy crown prince Mohammed bin Salman said his country would only agree to limits at the gathering if it was matched by Iran and other major producers.
His comments sent oil prices diving four percent Friday, and extended the falls this week.
At around 0810 GMT Tuesday, US benchmark West Texas Intermediate for delivery in May was down 39 cents, or 1.09 percent, at $35.31 and Brent crude for June was 28 cents, or 0.74 percent, lower at $37.41.
“Crude oil is facing headwinds as Saudi Arabia hesitated to commit to freeze production unless Iran agrees to join the output freeze camp,” said Margaret Yang, market analyst at CMC Markets Singapore.
“This has brought down the market’s expectation of what will be achieved in the long-awaited production freeze talk,” she said in a market commentary.
But research house Capital Economics said it was “too soon to give up on a Doha deal”, adding that a “compromise agreement” was still likely even without Iran’s full participation.
Iran crude production has surged since the West lifted nuclear-linked sanctions in January, with the country’s oil minister saying Sunday that exports of the commodity had now passed two million barrels per day.
World oil markets have slumped from levels above 100 a barrel in mid-2014 owing to overproduction, a supply glut, weak demand and a slowdown in the global economy.
The losses have only been stalled by hopes over the possible output freeze. But Capital Economics said in a note: “A sustained recovery in oil prices would probably require outright cuts in global supply and increases in demand” rather than just a freeze.