Oil prices extend losses after Monday’s bruising session
London (Mar 15) Oil prices continued to head south on Tuesday, after deep losses in the prior session that were spurred by fading expectations for a supply freeze by major producing nations.
Light, sweet crude futures for April delivery CLJ6, -2.34% dropped 98 cents, or 2.7%, to $36.19 a barrel on the New York Mercantile Exchange. May Brent crude LCOK6, -2.45% on London’s ICE Futures exchange fell $1.11, or 2.8%, to $38.43 a barrel.
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Nymex crude lost more than 3% and Brent fell more than 2% in the prior trading session. Investors sold off oil contracts following news that Iran’s oil minister said the country wouldn’t participate in an output freeze with other nations, dimming hopes for a supply freeze by major producing nations and reining in a major bullish force for the oil market.
“If you freeze production now ... then all you’re doing is giving market share to Iran,” said Virendra Chauhan, oil analyst at Energy Aspects. “The reality is we don’t see a production cut until December.”
He added that the oil market at the moment has a natural cap near current levels, given the quick availability of new supply that comes online at higher prices. “What can happen is ... you have a rally that kills the rally.”
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Major oil producers have shown few signs of willingness to curb output. A monthly production report from the Organization of the Petroleum Exporting Countries released Monday showed the group’s output declined by less than 200,000 barrels in February. Much of that came from pipeline disruptions in Nigeria and Iraq, some of which have already been repaired.
Later this week, investors will get an update on U.S. oil inventories. Due Wednesday, the government data are expected to show stockpiles in the key U.S. oil hub in Cushing, Okla., are nearing maximum levels.
Benchmark Nymex reformulated gasoline blendstock for April RBJ6, -2.01% fell 2.5% to $1.387 a gallon.
ICE gasoil for April fell 1.6% to $350 a metric ton.
Source: Reuters
