Crude Oil Extends Drop as Iran Spurns Production Freeze Accord

  • Iranian output rose by most in almost two decades in February
  • U.S. stockpiles forecast to climb 3.2 million barrels: survey

Oil Rose as Producers Said to Meet Over Freeze

Oil dropped for a second day as Iran bolstered crude exports and Russia signaled the Persian Gulf nation won’t join major producers in freezing output to reduce a global glut.

Futures fell 2.3 percent in New York adding to Monday’s 3.4 percent decline. Iran has “reasonable arguments” for not joining an alliance to cap output now, Russian Energy Minister Alexander Novak said after meeting with his Iranian counterpart. Iranian production climbed last month by the most in almost two decades following the end of sanctions, OPEC said on Monday. U.S. supplies probably rose last week, keeping stockpiles at the highest since 1930.

"Recent Iranian statements make it crystal clear to the market that they aren’t about to freeze production," said Mike Wittner, head of oil markets at Societe Generale SA in New York. "There had been questions about how significant a freeze would be even if they took part. A freeze excluding Iran will do next to nothing about supply."

Oil has rebounded after slumping to a 12-year low this year on speculation stronger demand and falling U.S. output will ease a surplus. Talks on the freeze are most likely to occur in Qatar’s capital Doha next month, according to Gulf Organization of Petroleum Exporting Countries delegates.

West Texas Intermediate oil for April delivery dropped 84 cents to close at $36.34 a barrel on the New York Mercantile Exchange. It’s the lowest settlement since March 4.

Declines eased after the settlement when the American Petroleum Institute was said to report U.S. crude supplies rose 1.5 million barrels last week. WTI traded at $36.72 as of 4:49 p.m.

Proposed Meeting

Brent for May settlement declined 79 cents, or 2 percent, to $38.74 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a 66-cent premium to WTI for May delivery.

No countries have received invitations or an agenda for a meeting in Doha, said four OPEC delegates, who asked not to be identified because the matter isn’t public. The Qatari capital is one option as a location for the talks, said Russia’s Novak at the Russian embassy in Tehran, adding that he hopes Iran’s Oil Minister Bijan Namdar Zanganeh will participate.

Iran increased output by 187,800 barrels a day to 3.13 million a day in February, the biggest monthly gain since 1997, OPEC said in its report.

"There’s a lot of bearish news battering the market," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "Iran’s rejection of the freeze deal and the rise in Iranian production have put an end to the rally."

U.S. supplies; Commodity Index; Obama bars drilling:

  • U.S. crude inventories probably rose by 3.2 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
  • Stockpiles of gasoline and distillate fuel probably declined while crude inventories at the Cushing, Oklahoma hub climbed, according to the Bloomberg survey.
  • The Bloomberg Commodity Index, a gauge of 22 raw materials, declined as much as 1.1 percent.
  • The Obama administration is reversing course with a new proposal to bar oil and gas drilling in Atlantic waters, according to an Interior Department statement.
  • The plan sets the stage for selling oil and gas leases in the Arctic waters of the Chukchi and Beaufort seas, as well as Alaska’s Cook Inlet and the Gulf of Mexico, where 10 auctions were tentatively scheduled from 2017 to 2022.
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