SYDNEY (BLOOMBERG) – Crude fell sharply in Asia on Monday (April 6) after a delay to a planned meeting of top producers to discuss output curbs raised doubts over the prospects for an agreement.
Brent futures dropped as much as 12 per cent in London, after surging by half of their value over the previous three sessions as a production accord started to take shape. However, a virtual gathering of the Opec+ alliance that was originally scheduled for Monday was postponed to Thursday as Saudi Arabia and Russia traded barbs over who was to blame for the collapse in oil prices.
Some progress was made toward an agreement on Sunday, according to diplomats, but the lack of participation from the US – the world’s largest producer -could prove to be a stumbling block. Despite originally calling for the deal, President Donald Trump on Saturday described Opec as a cartel and threatened tariffs on foreign oil. Trump said late Sunday that he could impose “very substantial” levies but didn’t think he’d need to.
The aim of the talks is to cut production by about 10 million barrels a day, a tenth of global production. But whether that can support prices that have fallen by more than half this year as the coronavirus crippled the global economy is questionable. The International Energy Agency said Friday the deepest output cuts in the industry’s history wouldn’t be enough to steady the market.
“The likelihood of a deal being done is extremely low,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group. “Certainly the type of agreement you’d need to stabilize the market is a long shot given how much demand has been hit.”
Brent crude fell 6.4 per cent to US$31.93 a barrel on the ICE Futures Europe exchange as of 8:15am in Singapore. It rallied 37 per cent last week. The contract’s six-month contango deepened futher from US$3.96 on Friday, indicating an abundance of supply.
West Texas Intermediate declined 8.3 per cent to US$25.99 a barrel on the New York Mercantile Exchange after dropping as much as 11 per cent earlier. The contract surged 32 per cent last week.
Oil prices are still less than half the levels at the start of the year, with the coronavirus crisis crushing demand.