Oil drops as Saudi cautious on output freeze

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AFP

LONDON — Oil prices fell on Friday as Saudi Arabia reportedly urged caution on a possible output freeze by producers to tackle a global supply glut, traders said. Around 1130 GMT, U.S. benchmark West Texas Intermediate for delivery in May slid 89 cents to US$37.45 a barrel. Brent North Sea crude for June delivery was down 82 cents at US$39.51 a barrel compared with Thursday’s close. Bloomberg News on Friday reported that according to Saudi Arabia’s deputy crown prince, the kingdom should freeze its oil output only if mirrored by Iran and other major oil producers. “If all countries agree to freeze production, we’re ready,” Mohammed bin Salman said in an interview.

Major oil producers led by Russia and Saudi Arabia will meet on April 17 in Doha to discuss measures to stabilize prices, including a proposal not to pump out oil above a certain level. Oil prices are being hit in part owing to the return of Iranian crude to world markets after years of economic sanctions on Tehran were lifted following a nuclear deal last year. Official data released Wednesday meanwhile showed that U.S. commercial crude inventories climbed to a fresh record high last week, further underscoring concerns about a market brimming with supplies and not enough demand. Shailaja Nair, senior managing editor at global energy information provider Platts, said “unchanged fundamentals” of supply and demand remain a key influence on market sentiment. “The market is still oversupplied with crude, demand is still the same, we’re not seeing any rise in demand. Nor is there any possibility of any rise in demand in the near term,” she told AFP. But Nair said only a decision to cut production rather than an output freeze will boost prices. “Considering the amount of crude already in the market, a freeze is not going to make much of a difference,” she said. A fall in the U.S. dollar was meanwhile unable to provide any lift to oil prices heading into the weekend and before key U.S. jobs data.

The greenback tumbled this week after U.S. Federal Reserve chief Janet Yellen trod a cautious line about the outlook for the global economy and indicated that U.S. interest rates were unlikely to rise before June. A weaker U.S. unit typically bolsters the appeal of U.S. dollar-priced oil for buyers using rival currencies.