TSX Could Open Lower As Brent Slides on Saudi Comments

Asia suffered a sharp drop in crude oil prices which fell from 1.54% to $31.38 a barrel.

The market will eventually rebalance because high-cost producers will have to “lower costs, borrow or liquidate” to cope with the slump in oil prices, Al-Naimi said, adding that he doesn’t know when the current price rout will end. However, Saudi oil minister Al-Naimi also noted that he expects more countries to agree on the output freeze scheme by next month.

International Monetary Fund head Christine Lagarde told CNNMoney she’s anxious sluggish global demand means oil prices are “going to be low – and for longer”. Though many had hoped the recent talks between Russian Federation and Saudi Arabia to cap production were merely the first step toward stabilizing oil prices and resuscitating the oil sector, it was clear that Saudi Arabia has no intention of helping its competitors. An accord last week to freeze the oil production of Saudi Arabia, Russia, Qatar and Venezuela at January levels is “not like cutting production, that’s not going to happen”. Before oil started falling in late 2014, the peak price was at $114 per barrel.

The success of a proposal for the world’s biggest producers to freeze crude output hinges on unified support, Iraq’s oil minister said, a day after fellow OPEC member Iran called the plan “ridiculous”. U.S. crude fell $1.16 to $30.71.

The rally benefited from bids to narrow the discount of the expiring front-month contract in United States crude to the second month, traders said.

Others, meanwhile, have been quick to point out that January’s production levels (the level at which the “freeze” would take place) remained historically high, and have emphasised the need for a reduction in output. Brent, the global benchmark for crude, settled up $1.14, or 3.4 percent, at $34.41 a barrel after market sources cited loading problems for North Sea crude.

Al-Naimi was careful not to single out any one country, in the wake of accusations Saudi Arabia is trying to run the U.S.’s shale oil play out of business. Indeed, Iranian Oil Minister Bijan Zanganeh said the idea of a freeze was “laughable”.

Between 1 million and 2 million barrels of crude are now produced every day in excess of demand, leaving storage facilities around the world brimming.

A few weeks later, Iran announced that it had increased its oil production capacity by 400,000 barrels per day (bpd) thus moving closer to Zangeneh’s pledged extra capacity.