Oil price dropped by 4 percent yesterday, following comments by a Saudi prince who reportedly said the kingdom will not freeze output without Iran and other major producers doing so.
After winning some support from a weaker dollar that made crude priced in the US unit cheaper for holders of rival currencies, oil prices slumped in sharp response to the Kingdom’s posture.
Oil slid this week on waning prospects of an output freeze by producers to tackle a supply glut that shows no signs of ending, just as the United States (US) crude inventories hit record heights.
“The suggestion that Saudi Arabia will not freeze oil production if Iran doesn’t do the same, coupled with a stronger dollar, has taken a sledge hammer” to prices, said Jasper Lawler, an analyst at traders at CMC Markets.
Brent crude for June delivery, the new front month contract for the global benchmark, settled down $1.68, or 4.1 percent, at $38.67 a barrel. It fell 3 percent for the week.
Brent finished the first quarter up 6 percent and March 15 percent higher.
U.S. crude’s front-month settled down $1.55, or 4 percent, at $36.79. It lost 7 percent on the week, after gaining 4 percent in the first quarter and 14 percent in March.
Prices barely reacted to data showing U.S. oil and gas rigs falling for a 15th straight week, reaching the lowest levels since at least the 1940s.
Data released separately by the U.S. Commodity Futures Trading Commission showed hedge funds and other big speculators cut their net long position in U.S. crude for the first time in six weeks during the week to March 29 as investors feared the rally may not continue.
Around 1630 GMT, US benchmark West Texas Intermediate for delivery in May was down $1.41 at $36.93 a barrel compared with Thursday’s close.
Brent North Sea crude for June delivery shed $1.57 to $38.76 a barrel. Both contracts were down also compared with one week earlier.
On Friday it was reported that according to Saudi Arabia’s deputy crown prince, the kingdom should freeze its oil output only if mirrored by Iran and other major crude producers.
“If all countries agree to freeze production, we’re ready,” Mohammed bin Salman said in an interview.
Major oil producers led by Russia and Saudi Arabia will meet on April 17 in Doha to discuss measures to stabilise prices, including a proposal not to pump out oil above a certain level.
Oil prices are being hit in part owing to the return of Iranian crude to world markets after years of economic sanctions on Tehran were lifted following a nuclear deal last year.
Official data released Wednesday had showed that US commercial crude inventories climbed to a fresh record high last week, further underscoring concerns about a market brimming with supplies and not enough demand.
Shailaja Nair, senior managing editor at global energy information provider Platts, said “unchanged fundamentals” of supply and demand remain a key influence on market sentiment.
“The market is still oversupplied with crude, demand is still the same, we’re not seeing any rise in demand. Nor is there any possibility of any rise in demand in the near term,” she told AFP.
But Nair said only a decision to cut production rather than an output freeze will boost prices.
“Considering the amount of crude already in the market, a freeze is not going to make much of a difference,” she said.