LONDON – Oil fell on Monday after Iran dashed hopes of a coordinated production freeze any time soon, returning bearish sentiment to the market on the supply glut that has sent prices crashing.
Global benchmark Brent crude futures fell back below US$40 a barrel, trading at US$39.70 at 1128 GMT, down 69 cents US or 1.7 percent on Friday’s close. Brent hit a 12-year low of US$27.10 in January.
U.S. crude was down 82 cents US at US$37.68 a barrel.
“Oil is down because Iran said they’d only join the output freeze group after they reached production of 4 million barrels a day (bpd),” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Iran’s oil exports are due to reach 2 million bpd within the Iranian month that ends on March 19, up from 1.75 million in the last month, oil minister Bijan Zanganeh said on Sunday.
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Zanganeh poured cold water on hopes for a fast deal on freezing production, saying the OPEC member would join discussions only once its own output reached 4 million bpd. Zanganeh is to meet his Russian counterpart Alexander Novak in Tehran on Monday, according to news agency reports.
Saudi Arabia seemed to have stuck to a preliminary cope with another producers to freeze output, since it’s crude production held steady in February at 10.22 million bpd, a business source told Reuters.
OPEC members and non-OPEC producers are likely to hold their next meeting to go over an output freeze in mid-April in Doha, OPEC sources told Reuters.
A March 20 meeting in Russia, that was a part of an early on plan, now looks unlikely.
Worries about demand fundamentals moved into the spotlight as investment bank Morgan Stanley warned that a slowing global economy and high production would prevent any sharp rises in oil prices.
“Oil prices now appear to have bottomed, even though they will probably stay subdued throughout this season before starting to move higher in 2017,” the U.S. bank said in a research note. It added that cheap oil had not provided the boost to growth that many had envisioned.
“When oil costs are falling below production costs, the income gains for consumers will be smaller than the costs to producers, and falling oil prices become a negative-sum game,” it said.
? Thomson Reuters 2016
