Oil prices wobble as hopes dim for production cuts
London (Apr 4) Oil prices were mixed on Monday, as the market showed some skepticism that a global agreement on oil output levels would be reached in Doha on April 17.
Major global oil producers, including both members and nonmembers of the Organization of the Petroleum Exporting Countries, are scheduled to meet in Doha on April 17 to discuss a potential freezing of oil output.
Erasing much of a bigger, earlier fall, West Texas Intermediate crude for May CLK6, +0.33% fell 8 cents to $36.73 a barrel. On Friday, WTI prices settled at $36.79 a barrel, down $1.55, or 4%. Futures settled at their lowest level since March 15 and lost 6.8% for the week, according to FactSet.
June Brent crude LCOM6, +0.34% the global benchmark, rose 5 cents to $38.72 a barrel. On Friday, the contract fell $1.66, or 4.1%, to $38.67 a barrel on London’s ICE exchange, losing nearly 6% for the week.
“All the hope connected to the April 17 meeting is now lost, and we are probably starting on the process down to $35 a barrel,” said Bjarne Schieldrop, a commodities analyst at SEB markets.
Saudi Arabia said Friday it would only freeze production if Iran, a fellow member of the Organization of the Petroleum Exporting Countries, agreed to freeze as well. Iran’s oil minister on Sunday said the country’s oil exports jumped again in March, potentially undermining a global deal to limit crude output and raise prices.
Output from major non-OPEC producer Russia hit a record high in March, eroding market confidence that the global supply glut is tapering off. Russia’s oil production hit post-Soviet highs of 10.912 million barrels a day, according to the Energy Ministry’s CDU-TEK unit. The figures reflect a 2.1% rise from March 2015.
But although current fundamentals are unlikely to support crude prices above $45 a barrel this year according to analysts, there could be some substantial deviation between the $30 and $40 marks depending on several factors which could impact the market.
In a note released Monday, the U.K.’s Barclays Capital warned of several factors that could seriously affect the fragile oil markets.
The bank added that it still expects the global crude surplus to narrow, but the idea that the market surplus will seamlessly fall to 800,000 b/d from 1.7 million b/d is false.