Crude prices extended losses in Asia Monday after comments by Saudi Arabia cast doubt whether key producers meeting would reach an agreement to freeze output to address a global supply glut.
Hopes for a deal at the April 17 gathering in Doha led by Russia and Saudi Arabia had been a major driver of a rally in prices from near 13-year lows in February.
But the latest comments by Saudi Arabia’s deputy crown prince, Mohammed bin Salman, signalling a reluctance to freeze output unless others did the same knocked down already low expectations of an accord.
“If all countries agree to freeze production, we’re ready,” he said in an interview with Bloomberg News.
At around 0640 GMT, US benchmark West Texas Intermediate for delivery in May slid 41 cents (1.11 per cent) to $36.38 while Brent crude for June fell 40 cents (1.03 per cent) to $38.27.
Both contracts plunged about four per cent Friday.
Michael McCarthy, an analyst with CMC Markets in Sydney said the price slump came as “no surprise” as traders reacted to Salman’s comments.
“Part of the recent strong rally has been related to some optimism in the agreement and that’s now looking less likely following those comments from the Saudis,” he said by telephone.
“The markets are looking for a curtailment of supply somewhere. They are looking to groups like OPEC. The potential for OPEC to reign in any production is very slight, particularly given the Iranians are coming back,” he added, referring to the Organisation of the Petroleum Exporting Countries producers’ group.
Iran has been ramping up production after nuclear-linked Western economic sanctions were lifted in January, adding to the saturated market.
“There were renewed concerns over continuing oversupply due to comments from Saudi Arabia that it will agree to freeze production only if Iran and other major producers agree to do the same,” said EY oil analyst Sanjeev Gupta.
“Crude oil prices also came under pressure from reports that crude oil production from Iran increased by 250,000 (barrels per day) in March since the lifting of sanctions.”