Oil prices decline amid oversupply outlook

‘Yesterday’s increase could have come mainly from OPEC trying to rally the market into thinking that there will be action to come between OPEC and non-OPEC producers, ‘ Phillip Futures analyst Daniel Ang told AFP, referring to the discussions on a possible production freeze. “Weak economic growth, slow Chinese demand, strong dollar” have been among the key drivers weighing on prices, she said.

While Saudi oil minister al-Naimi seemingly backed that statement up on Tuesday, he followed that up with another comment that crushed the hopes of oil bulls.

El-Badri addressed the current low price of oil and said OPEC members are as interested as any other party in ending the current situation, which has hit Texas particularly hard.

Analysts and traders remain skeptical that the freeze will be effective in rebalancing the market.

His words were clearly aimed at Russian Federation and Iran, Saudi Arabia’s bitter adversaries in the war in Syria and the larger Shia-Sunni battle for dominance in the Middle East.

Just a day earlier, oil prices surged after the International Energy Agency predicted that oil supply and demand would balance next year because of a steep drop in new drilling, namely in the U.S. The group’s executive director, Fatih Birol, predicted that crude would more than double to $80 a barrel by 2020.

Russia, Saudi Arabia, Qatar and Venezuela said last week, following talks in Doha, that they were ready to freeze production at January levels if other producers did the same.

“OPEC has [been] recently focusing on market share rather than defending the price and this gave the organization the big role in reshaping the structure of the global oil and gas industry”, Faleh al-Amri said at the Argus Middle East Crude Conference in Abu Dhabi.

Crude oil fell $1.58 to $31.81 a barrel while Brent crude, which is used to price oils internationally, fell $1.36 to $33.31 a barrel in London.

“There is a common sense and there is a need for more money, and I think those two things will cause, maybe not all of the countries, but most of the countries that count to freeze”, including Iran, Naimi said.

“U.S. shale output is going to decline”, said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “What’s sent the oil price down is dismissal of rumours there could be a production cut after the freeze, that’s not going to happen”, Spencer Welch, director at IHS Energy told City A.M.

Iran’s oil minister Bijan Zangeneh on Tuesday called the Saudi Arabia-led idea for countries to freeze production a “joke”, according to Iranian state broadcaster Press TV. But Iran stated that it will not after years of sanctions wrecking its economy.

“It’s been a bit more delayed that we expected simply because shale production has been so resilient”, he said.