April West Texas Intermediate crude CLJ6, -6.26% lost $1.52, or 4.6%, to settle at .87 a barrel on the New York Mercantile Exchange.
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The agreement boosted crude prices that have seen a seventy percent drop since mid-2014, falling from over $100 per barrel to below $27.
Speaking from an energy conference in Houston, Saudi Oil Minister Ali al-Naimi was quoted by Houston Public Media as saying finding a coordinated solution to lower oil price may require producers to “really work hard”.
Last week, Saudi Arabia, Qatar, and Venezuela – all members of the 13-member OPEC oil cartel – along with Russian Federation announced a coordinated oil-production freeze in an effort to bring some balance to the oil market.
Key oil exporters Saudi Arabia and Russian Federation have proposed to freeze output at January levels, which were near record highs, only if other producers also do the same.
Shale drillers are “grievously wounded” and are about to be “decimated” in the coming months, said Mark Papa, the former EOG Resources Inc. chief executive officer who helped create the shale industry more than a decade ago. Later on Tuesday, Venezuelan Oil Minister Eulogio Del Pino told Reuters he was seeking to convene a meeting of major OPEC and non-OPEC producers in mid-March, with more than 10 expected to sign on to the agreement. Instead it will keep output where it is now and let low prices kill off higher cost production. “This is the first step to see what we can achieve”, Secretary General Abdalla Salem El-Badri said at the conference on Monday.
“Not many countries are going to deliver” even if they promise supply curbs, al-Naimi said.
Mr Al-Naimi stressed Saudi Arabia’s position over the past 18 months that market forces, rather than co-ordinated production cuts, should remain the primary means of balancing the market.
Indeed, Iranian Oil Minister Bijan Zanganeh said the idea of a freeze was “laughable”. “One non-OPEC country is willing to join hands with OPEC, and that is us”, Al-Rumhy added.
Oil prices dipped slightly in early trading on Tuesday after posting strong gains the previous session on the back of an expected drop in USA production, but which analysts expect to be countered by rising output from Iran.
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In his speech Tuesday, al-Naimi said he has no concerns about oil demand. “There is a common sense and there is a need for more money, and I think those two things will cause, maybe not all of the countries, but most of the countries that count to freeze”, including Iran, he said.
