Oil Falls Most in Two Weeks Before Producers Meet on Cap in Doha

  • Delegates begin arriving in Qatar for output talks on Sunday
  • Iran to send representative, not oil minister, to Qatar talks

Oil dropped the most in two weeks before suppliers are scheduled to meet in Doha to discuss a production freeze.

Futures fell 2.8 percent in New York. Producers will consider capping output at January levels in an effort to stabilize prices. Iran ended weeks of speculation by confirming it will send a representative, though not its oil minister, to the talks. The Islamic republic, which is reviving oil exports after years of sanctions were lifted in January, has ruled out joining the accord.

"The market has very low expectations for the meeting in Doha," said Michael D. Cohen, an analyst at Barclays Plc in New York. "The rally earlier this week may have led to new longs and the buyers are now reconsidering."

Oil has rebounded after falling to the lowest in more than 12 years amid signs a global surplus will ease as U.S. production declines. While 40 analysts and traders surveyed by Bloomberg News were evenly split over whether the talks in the Qatari capital will succeed in capping output, a majority of those who predicted a deal said it would have no impact on actual flows of crude.

West Texas Intermediate for May delivery fell $1.14 to close at $40.36 a barrel on the New York Mercantile Exchange. It was the biggest decline since April 4. Futures rose 1.6 percent this week. Total volume traded was 28 percent above the 100-day average at 2:45 p.m.

Doha Meeting

Brent for June settlement slipped 74 cents, or 1.7 percent, to $43.10 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 2.8 percent this week. The global benchmark closed at a $1.39 premium to June WTI.

"The prospect of an output freeze continues to be an absolute farce," said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. "We rose up to $42 on the prospect of an agreement in Doha and now the air is being let out of the balloon. A freeze is meaningless when everyone is pumping at or near capacity and nobody will abide to it anyway."

Hossein Kazempour Ardebili, Iran’s liaison to the Organization of Petroleum Exporting Countries, will attend the meeting on April 17 in the place of Oil Minister Bijan Zanganeh, according to Akbar Nematollahi, Director of Public Affairs at the oil ministry. The ministry had said as recently as Wednesday that Zanganeh was undecided about going.

Zanganeh has said that Iran will reject any limits on its output before reaching pre-sanctions levels, and dismissed the notion of joining the freeze as “ridiculous.” Saudi Arabia has said its compliance depends on Iran joining in.

Market Response

“The market is gradually responding to the fact that prices have been lower for longer than expected and higher-cost producers have had to come out of the market,” Neil Atkinson, head of the oil industry and markets division at the International Energy Agency, said in an interview with Bloomberg Television. The freeze plan will “make little or no difference to the actual fundamentals of the market.”

Global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on output outside OPEC, the IEA said in a report on Thursday.

U.S. crude supplies rose by 6.63 million barrels last week to 536.5 million, the most since 1930, according to an Energy Information Administration report Wednesday. Crude production fell to 8.977 million barrels a day last week, agency data show. It was the first decline below 9 million barrels since October 2014. Active oil rigs in the U.S. fell to 351 last week, the fewest since November 2009, according to Baker Hughes Inc.

Iran output and other oil-market news:

  • Iran’s crude shipments have risen by more than 600,000 barrels a day this month, according to tanker-tracking data compiled by Bloomberg.
  • The global glut will ease to 200,000 barrels a day in the last six months of the year from 1.5 million barrels in the first half, the IEA said Thursday.
  • Mexico’s Deputy Energy Minister Lourdes Melgar will attend the Doha talks, according to an official with knowledge of her schedule. So will Kazakhstan’s Energy Minister Kanat Bozumbayev, the Energy Ministry press service said by phone.
Before it's here, it's on the Bloomberg Terminal.