Oil extends losses, falls below $40

World oil prices sank further below $40 per barrel on Tuesday, as hopes faded that major crude producers would freeze output levels to ease a world surplus.

At around 17:00 GMT, United States benchmark West Texas Intermediate for delivery in April was down a hefty $1.11 at $36.07 per barrel.

Brent North Sea crude for May delivery slid 96 cents to $38.57 a barrel compared with Monday’s close.

“The price of Brent crude has fallen four of the last six days, its worst run in three weeks as chances become more remote of a joint output freeze amongst OPEC and non-OPEC producers while Iranian production ramped up significantly last month,” said CMC Markets analyst Jasper Lawler.

A meeting proposed by Russia and Saudi Arabia to discuss output limits has been pushed back to April from March 20, after signs that some key producing nations do not support the move.

Oil prices slid Monday after Iran reportedly signalled it would not join the effort until its own crude production reached pre-sanction levels of 4.0 million barrels per day.

WTI had slumped 3.4 per cent and Brent dipped 2.1 percent, giving up gains that saw the global benchmark break $40 a barrel for the first time this year.

“I remain sceptical on any such supply talks as the probability of any definitive action is unlikely to be high,” added analyst Bernard Aw at IG Markets in Singapore.

Even if the talks happen, the meeting’s agenda is freezing production levels – a stop gap measure – rather than the more long-term goal of cutting output to reduce the global crude oversupply, Aw noted.

“What I fear is that any breakdowns in the proposed talks, if there even is a meeting, will drag oil prices through the mud again,” he said.

The talks were supposed to be held in Russia this month, but are now set to happen next month in Doha, Qatar.

Singapore trade minister S. Iswaran told a gas conference Tuesday that crude prices are likely to remain between $30 and $50 per barrel this year due to oversupply, a slowing Chinese economy and Japan restarting nuclear power plants.

Traders are also watching for US economic data and a meeting of US Federal Reserve policy makers starting Tuesday for clues on whether they will announce another interest rate hike.

A rate increase is a boost to the dollar, which would make dollar-priced oil more expensive, hurting demand and prices. The Fed raised rates for the first time in nearly a decade in December.

AFP