Oil Falls as Doha Output Talks Fail Amid Saudi Demands on IranBy
No deal as Saudi Arabia states all OPEC members take part
Kuwait's output fell 60% on Sunday amid oil-workers strike
Oil slid after talks Sunday in Doha between the world’s biggest producers ended without an agreement to limit supplies.
Futures dropped 1.4 percent in New York, paring an earlier loss of 6.8 percent. The summit in the Qatari capital, which dragged on for more than 10 hours beyond its scheduled conclusion, finished with no final accord. Declines eased as a labor strike in Kuwait, OPEC fourth-biggest member, cut output for a second day. Output from the country’s northern fields was back to normal, the Kuwait Oil Co. said in a statement.
"We have two compelling, competing stories in the market," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "There’s the failure to reach an agreement in Doha, which supports an OPEC in disarray narrative, and we have an oil workers strike in Kuwait that’s taking a significant amount of supply off the market."
Oil rebounded after falling to the lowest level in more than 12 years in February amid speculation that a deal would be reached in Doha as U.S. production fell. Oil ministers from 16 nations, representing about half the world’s output, gathered in a bid to stabilize the global market, the first significant attempt at coordinating oil output between the Organization of Petroleum Exporting Countries and nations outside the group in 15 years.
West Texas Intermediate for May delivery fell 58 cents to settle at $39.78 a barrel on the New York Mercantile Exchange. It’s the lowest close since April 8. Total trading volume was 35 percent above the 100-day average at 2:37 p.m.
Brent crude for June settlement dropped 19 cents, or 0.4 percent, to $42.91 on London’s ICE Futures Europe exchange after earlier falling as much as 7 percent. The global benchmark closed at a $1.72 premium to June WTI.
Discussions broke down after Saudi Arabia and other Gulf countries rejected any deal unless all OPEC members joined including Iran, which wasn’t present at the meeting, Russian Energy Minister Alexander Novak said.
“Given the expectations ahead of Doha, the failure to reach a freeze agreement is likely to cause an oil market selloff,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former White House official. “The fact that Saudi Arabia seems to have blocked the deal is an indicator of how much its oil policy is being driven by the ongoing geopolitical conflict with Iran.”
Iran, which is reviving oil exports after international sanctions were lifted in January, ruled out any limits on its output before reaching pre-sanctions levels, dismissing the notion of joining the freeze as “ridiculous.”
OPEC members will consult among themselves and with other oil producers, Qatar’s Energy Minister Mohammed Al Sada said at a news conference after the meeting. The next scheduled bi-annual OPEC meeting is on June 2.
"They failed to even agree to a bland, vague statement," said Michael D. Cohen, an analyst at Barclays Plc in New York. "Doha was a distraction from the fundamental market rebalancing that was already taking place."
U.S. crude production fell to 8.977 million barrels a day in the week ended April 8, Energy Information Administration data show. It was the first decline bellow 9 million barrels in 18 months. The agency cut its 2016 output forecast to 8.6 million barrels a day from 8.67 in March, according to its monthly Short-Term Energy Outlook released April 12.
Kuwait oil output lunged 60 percent to 1.1 million barrels a day when the strike began on Sunday, while the state refining company slowed operations at its three oil-processing plants to less than 60 percent of their combined capacity.
Oil futures rose from the lows "because there was another event that happened, the disruption of supply in Kuwait that pulled 1.6 million barrels out of the market, that’s a lot more than could have been accomplished at the Doha meeting," Ed Morse, head of global commodity research at Citigroup Inc., said on Bloomberg Television.
Workers in Kuwait are striking to protest cuts in pay and benefits as Middle Eastern crude exporters, reeling from lower oil income, cut subsidies and government handouts. The walkout is the first by oil workers in Kuwait since at least 1996, according to Middle East Economic Digest.
Related stories and commentary:
- The freeze deal fell victim to tensions between Saudi Arabia and its main regional rival, Iran, a relationship soured by proxy conflicts from Syria to Yemen.
- Some hedge funds were banking on the Doha oil summit working out.
- The oil market faces a bumpy ride on its way to recovery later this year.
— With assistance by Mohammed Sergie, Javier Blas, Anthony Dipaola, Grant Smith, and Nayla Razzouk
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