Oil prices tumbled further in Asia Tuesday on dwindling hopes that key producers will reach an agreement to freeze output when they meet this month to discuss a global supply glut.
After breaking above $40 in March on expectations for the Russia and 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, with analysts also saying 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 move was matched by Iran and other major producers.
Hi comments sent oil prices diving four per cent Friday, and extending the falls this week.
At around 0330 GMT Tuesday, US benchmark West Texas Intermediate for delivery in May was down 15 cents, or 0.42 per cent, at $35.55 and Brent crude for June was nine cents, or 0.24 per cent, lower at $37.60.
“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. Research house Capital Economics said however that 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 oil 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.