Oil tumbled by the most in two months after output talks Sunday between the world’s biggest producers ended without any agreement on limiting supplies, a diplomatic failure that threatens to renew the rout in prices.
Futures fell as much as 6.8 percent in New York, the biggest intraday drop since Feb. 1. The summit in the Qatari capital, which dragged on for more than ten hours beyond its initially scheduled conclusion, finished with no final accord. There were significant hurdles to any deal after Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said the kingdom wouldn’t restrain its production without commitments from other major producers including Iran, which has ruled out freezing for now.
West Texas Intermediate for May delivery lost as much as $2.75 to $37.61 a barrel on the New York Mercantile Exchange and was at $38.36 at 10:35 a.m. Hong Kong time. The contract fell $1.14, or 2.8 percent, to $40.36 on Friday. Total trading volume was almost fivefold the 100-day average.
Brent for June settlement dropped as much as $3, or 7 percent, to $40.10 a barrel on the London-based ICE Futures Europe exchange. The contract lost 74 cents, or 1.7 percent, to $43.10 on Friday. The global benchmark was at a $1.47 premium to WTI for June.
Oil ministers from 16 nations, representing about half the world’s output, gathered in the Qatari capital in a bid to stabilize the global market, the first significant attempt at coordinating oil output between the Organization of Petroleum Exporting Countries and nations outside the group in 15 years. Discussions stumbled after Saudi Arabia and other Gulf nations wouldn’t agree to any deal unless all OPEC members joined including Iran, which wasn’t present at the meeting, Russian Energy Minister Alexander Novak told reporters.
Tense Negotiations
Forty traders and analysts surveyed by Bloomberg last week were evenly split on whether a consensus would be reached, and tensions were visible throughout the negotiations. While analysts doubted that any accord would have a significant impact on the global oil surplus, the group’s inability to agree undermines any prospect of coordinated action to solve the market slump.
Russia was surprised there wasn’t an agreement, said Novak. Officials from Saudi Arabia, Qatar, Venezuela and Russia — who initiated the push for a freeze in February — agreed to a draft accord on Saturday, but some countries changed their position right before the summit the following day, leading to “hot discussions,” he said.
“The fact that Saudi Arabia seems to have blocked the deal is an indicator of how much its oil policy is being driven by the ongoing geopolitical conflict with Iran,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former White House official.
Saudi Obstacle
A freeze could have sped up the rebalancing of the market by six months, which may now take until mid-2017, Novak said in a press conference after the talks. The “door is not closed” to a future accord, although “Russia won’t be as optimistic as before,” he said.
OPEC members will consult among themselves and with other oil producers until June, Qatar’s Energy Minister Mohammed Al Sada said at news conference after the meeting. The next scheduled bi-annual OPEC meeting is on June 2.
Iran, which is reviving oil exports after international sanctions were lifted in January, ruled out any limits on its output before reaching pre-sanctions levels, dismissing the notion of joining the freeze as “ridiculous.” The nation’s Oil Minister Bijan Namdar Zanganeh said Saturday he wouldn’t attend the Doha talks and won’t be a signatory to any deal as it would amount to self-imposed sanctions.
Kuwait production cuts and hedge fund positions:
- Kuwait’s crude production tumbled by 60 percent and its refineries scaled back operations as the state oil company took emergency measures Sunday to cope with the first day of an open-ended labor strike.
- Money managers’ net-long positions in WTI futures and options are more than twice as large as two months ago and increased by 11 percent in the week ended April 12, U.S. Commodity Futures Trading Commission data showed Friday.
Be the first to comment