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 last week after sources at the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, said they were close to a deal on reductions in oil production to reduce the global glut, although they want the participation of 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. The demand for fuel has decreased by around 30% worldwide due to the coronavirus, while these countries are flooding the markets with an unnecessary supply.
“The three-day delay in the OPEC + virtual meeting scheduled for (Monday) likely reduces the chances of a significant production agreement by at least 50%,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Brent futures LCOc1 fell $ 1.21, or 3.6%, to $ 32.90 a barrel at 2:01 p.m. EDT (1801 GMT), while US West Texas Intermediate (WTI) crude CLc1 fell from $ 1.77, or 6.3%, to $ 26.57.
The market was also weighed down by a report from data provider Genscape that stocks at the Cushing Oklahoma storage center, the WTI delivery point, increased by about 5.8 million barrels last week, indicated the 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 + could have a few months before global storage capacity is reached, so production cuts will have to happen no matter what.”
Oil prices: here
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.
But 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, “it will only scratch the surface of the overflow by over 23 million barrels planned for April 2020 “.
Monday’s crude oil benchmarks fell after a sharp surge on April 2 and 3, with Brent gaining 38% and WTI 40% in the past two days as the market reacted to tweets from US President Donald Trump that an agreement to reduce production was imminent.
Goldman Sachs on the destruction of oil demand: here
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