Oil drops after Saudi Arabia and Russia delay meeting

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NEW YORK (Reuters) – Oil prices collapsed Monday, retreating from last week’s gains after Saudi Arabia and Russia delayed a meeting of oil producers to resolve a growing global excess supply while the coronavirus pandemic is under demand.

The global oil market rebounded more than 35% last week after sources from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, said they were close to a agreement on reductions in oil production to reduce the global glut, even if they want participation from the United States and others.

However, the OPEC + group meeting, originally scheduled for Monday, has been postponed to Thursday as gunfire between Russia and Saudi Arabia following the collapse last month of an existing supply cut agreement are being pursued. Fuel demand has declined by around 30% worldwide due to the coronavirus, as these countries flood the markets with unnecessary supplies.

“The delay in the OPEC + meeting triggered much of today’s liquidation due to major philosophical differences between Russia and the Saudis that will likely prevent a deal on Thursday,” said Jim Ritterbusch, president from Ritterbusch and Associates in Galena, Illinois.

Kirill Dmitriev, one of Moscow’s top oil negotiators, said on Monday that Russia and the Saudis were close to a deal to cut production.

Brent futures LCOc1 was $ 1.06, or 3.1%, down to $ 33.05 a barrel, while US West Texas Intermediate (WTI) crude CLc1 fell $ 2.26, or 8 %, ending at $ 26.08.

Prices in the United States have fallen more than the Brent global benchmark after a report by the data provider Genscape showed that stocks at the Cushing Oklahoma storage center, the WTI delivery point, increased by about 5.8 million barrels last week, according to traders.

If compared to official data from the U.S. Energy Information Administration on Wednesday, it would be the fifth consecutive weekly storage on the hub and the largest weekly increase on record since 2004.

“Global storage tanks will continue to be filled, and once storage capacity is reached, oil prices could plummet,” said Edward Moya, senior market analyst at OANDA in New York. “OPEC + may have a few months before global storage capacity is reached, so production cuts will have to happen no matter what.”

Oil prices: here

FILE PHOTO: The sun sets behind a crude oil pump cylinder on a drill stand in the Permian Basin in Loving County, Texas, United States, November 24, 2019. REUTERS / Angus Mordant / File Photo

OPEC + is working on an agreement to cut production by about 10% of world supply, or 10 million barrels per day (b / d), but member states want it to be a global effort, which would attract countries that do not normally restrict supplies from private oil companies, particularly the world leader in production in the United States.

Rystad Energy’s head of oil markets Bjornar Tonhaugen said that even if the group agreed to cut up to 15 million barrels a day, “this will only be enough to scrape the surface of the overflow with more than 23 million barrels planned for April 2020 ”.

Additional reports by Bozorgmehr Sharafedin in London, Florence Tan in Singapore and Jessica Resnick-Ault and Devika Krishna Kumar in New York; Editing by Marguerita Choy and Barbara Lewis

Our standards:Principles of the Thomson Reuters Trust.

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