Oil prices drop as Saudi cautious on output freeze

Published 01.04.2016 21:09
Updated 01.04.2016 21:12
emReuters Photo/em
Reuters Photo

Oil prices fell on Friday as Saudi Arabia reportedly urged caution on a possible output freeze by producers to tackle a global supply glut, traders said. Around 1130 GMT, U.S. benchmark West Texas Intermediate for delivery in May slid 89 cents to $37.45 a barrel. Brent North Sea crude for June delivery was down 82 cents at $39.51 a barrel, compared with Thursday's close.

Bloomberg News reported on Friday that according to Saudi Arabia's deputy crown prince, the kingdom should freeze its oil output only if mirrored by Iran and other major oil producers. "If all countries agree to freeze production, we're ready," Mohammed bin Salman said in an interview.

Major oil producers, led by Russia and Saudi Arabia. will meet on April 17 in Doha to discuss measures to stabilize prices, including a proposal not to pump out oil above a certain level.

Oil prices are being hit in part owing to the return of Iranian crude to world markets, after years of economic sanctions on Tehran were lifted following a nuclear deal last year.

Official data released Wednesday meanwhile showed that US commercial crude inventories climbed to a fresh record high last week, further underscoring concerns about a market brimming with supply and insufficient demand.

Shailaja Nair, senior managing editor at global energy information provider Platts, said the "unchanged fundamentals" of supply and demand remain a key influence on market sentiment. "The market is still oversupplied with crude, demand is still the same, and we're not seeing any rise in demand. Nor is there any possibility of any rise in demand in the near term," she told AFP. But Nair said only a decision to cut production rather than an output freeze will boost prices. "Considering the amount of crude already in the market, a freeze is not going to make much of a difference," she said.

A fall in the dollar was meanwhile unable to provide any lift to oil prices heading into the weekend and before key U.S. jobs data. The greenback tumbled this week, after Federal Reserve chief Janet Yellen trod a cautious line about the outlook for the global economy and indicated that US interest rates were unlikely to rise before June. A weaker US unit typically bolsters the appeal of dollar-priced oil for buyers using rival currencies.

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