Key producer and OPEC member Iran, which is ramping up production after nuclear-linked Western economic sanctions were lifted, has also reacted coldly to the freeze proposal.
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Riyadh says it will not reduce crude production at its own expense and that high-cost American oil producers should make the cuts. “The market correctly interpreted the presentation as bearish”. Similarly, the oil for delivery in far-month April traded lower by Rs 39, or 1.67 per cent, to Rs 2,297 per barrel in 678 lots.
Between 1 million and 2 million barrels of crude are now produced every day in excess of demand, leaving storage facilities around the world brimming with unwanted supplies. The U.S. Energy Information Administration today will have more exact figures.
The falls were a result of squabbling among members of the Organisation of the Petroleum Exporting Countries (OPEC) to freeze or cut production and rein in overproduction that has pulled down prices by 70 per cent since mid-2014. The country’s oil minister blasted the Saudi-led idea of production freeze as a “joke” on Tuesday.
“If Russia wants to freeze production at January levels it needs to increase production”, Fatih Birol, executive director of the Paris-based International Energy Agency, told reporters on Monday.
Saudi Arabia, Russia, Venezuela and Qatar reached a preliminary agreement in Doha to freeze output if other states join them. “Last year, global oil demand grew by twice its 10-year average”, he said.
Saudi Arabia delivered its starkest message yet to a reeling global oil sector, saying it wouldn’t rescue the industry from low prices by cutting its production, the Wall Street Journal reports.
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“We think that it’s inevitable that oil prices move back below the $30 market soon as supply continues to outstrip demand and inventory levels are very high”, Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd said in an e-mail to clients, according to Bloomberg. “Indian consumption races ahead as more motorists take to the roads, while Chinese demand growth cools in tandem with the economy”. This is because it was producing below its capacity and pre-sanction levels since 2011 while the other countries had raised their output limit to record levels in the mean time. “That’s challenging its safe-haven status and enhancing that of the Swiss franc and the yen”, said RBC Capital Markets’ head of FX strategy, Adam Cole.
