Oil prices decline on profit-taking

Oil prices rebounded Wednesday after a drop following a government report showed US crude inventories advanced to an 86-year high.

In London, benchmark Brent North Sea crude for April delivery jumped to $36.66 a barrel from $33.53 a week earlier. On Thursday, attention once more returned to the unlikely prospect of supply cuts from leading producers, notably members of the Organization of Petroleum Exporting Countries.

But the rally did not last into Friday as traders estimated that a freeze in production would not reduce a glut that has pulled down prices by 70 percent since 2014.

Ali al-Naimi, Saudi Arabia’s oil minister, says cutting production levels does not make sense, while Iran insists that freezing output is a joke.

However, Iran refused to go along, as it is seeking to ramp up production levels depressed for years by economic sanctions that were lifted last month.

“If some people freeze and others raise, then this is not a good policy”, Iraq’s Oil Minister Adel Abdul Mahdi said in an interview in Tokyo on Wednesday. With Iran’s joining into the competition, large oil producers like Saudi are more likely to force the little birds out of the forest.

Latest developments came after Saudi Arabia ruled out production cuts and suggested high-cost producers should be allowed to fail to help rebalance the market. Russia, Saudi Arabia, Venezuela, and Qatar have made an arrangement for a meeting where they will scrutinize the prices of oil, Bloomberg said on Thursday quoting Venezuela’s Oil and Mining Minister Eulogio del Pino.

United States commercial crude supplies rose by 3.5 million barrels in the week ending February 19 to 507.6 million barrels, the highest level on record. In addition, EIA is expecting a significant cut in the US production, with shale production to decline by 60,000 barrels per day this year, and a decline of 200,000 barrels per barrel day next year.

He noted that the loss of Iraqi Kurdish oil exports due to security issues on the main pipeline carry the crude, as well as a force majeure on Nigeria’s Forcados oil, balanced the recent increases to supply from Opec nations.