Oil slumps 4% as Saudi Arabia reaffirms no output cut

Saudi Oil Minister Ali Al-Naimi has ruled out imminent OPEC production cuts, although he said on Tuesday he was confident more nations would join a pact to freeze output.

U.S. crude futures settled up $1.84, or 6 percent, at $31.48 a barrel, rallying above $32 at one point. Oil prices fell Tuesday, with the Global Brent benchmark down 4% to $33.36 per barrel.

Shale and other new sources attracted by years of high oil prices pushed the supply of oil much higher than global demand, leading to the sharp drop in crude prices since mid-2014.

After a surprise meeting a week ago, Saudi Arabia, Russia, Venezuela and Qatar agreed to freeze production at January levels a week ago and Naimi said more support from other countries were likely to follow.

A day after Iran’s Oil Minister Bijan Namdar Zanganeh ridiculed a decision by the Organization of the Oil Petroleum Exporting Countries (OPEC) to freeze oil output, the Islamic Republic’s Ambassador to Oman said his country “is committed to OPEC’s oil output freeze decision”.

The U.S. government’s Energy Information Administration, which said last week crude stocks hit a record high, releases its supply report at 10:30 a.m. EST (1530 GMT). Saudi Arabia, however, had made it clear that the freeze would happen only if both Opec and non-Opec producers were committed to adhering to the plan.

Nigeria and Saudi Arabia are holding talks to stimulate oil price that has bottomed out over the last 20 months, Presidential spokesperson, Garba Shehu, has said. “Not many countries are going to deliver, even if they say they will cut production they are not going to deliver”.

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Saudi Arabia’s oil minister said Tuesday that production cuts to boost oil prices won’t work.

“If they freeze production at January levels when you’re already oversupplied by around a million barrels per day it just prolongs that situation of oversupply”, said Energy Aspects analyst Dominic Haywood.

“It sounds harsh, but it is the most efficient way to more balanced markets”, he said.

Chaos within OPEC is once again rocking oil prices – and rattling the stock market in the process.

That production comes from places including USA shale fields, Canada’s oil sands and deepwater projects that attracted investment during the years oil was priced over $100.