Oil gave up some of last week’s rally after a delay to a planned meeting of top producers to discuss output curbs and signs the U.S. won’t join any deal raised doubts over the prospects for an agreement.
Futures dropped as much as 12% in London after surging by half of their value over the previous three sessions as a production accord started to take shape. However, a virtual gathering of the OPEC+ alliance that was originally scheduled for Monday was postponed to Thursday as Saudi Arabia and Russia traded barbs over who was to blame for the collapse in oil prices.
Some progress was made toward an agreement on Sunday, according to diplomats, but the lack of participation from the U.S. — the world’s largest producer — could prove to be a stumbling block. Despite originally calling for the deal, President Donald Trump on Saturday described OPEC as a cartel and threatened tariffs on foreign oil. Trump said late Sunday that he could impose “very substantial” levies but didn’t think he’d need to.
The aim of the talks is to cut production by about 10 million barrels a day, a tenth of global production. But whether that can support prices that have fallen by more than half this year as the coronavirus crippled the global economy is questionable. The International Energy Agency said Friday the deepest output cuts in the industry’s history wouldn’t be enough to steady the market.
“The likelihood of a deal being done is extremely low,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “Certainly the type of agreement you’d need to stabilize the market is a long shot given how much demand has been hit.”
Brent crude fell 6.4% to $31.93 a barrel on the ICE Futures Europe exchange as of 8:15 a.m. in Singapore. It rallied 37% last week. The contract’s six-month contango deepened futher from $3.96 on Friday, indicating an abundance of supply.
West Texas Intermediate declined 8.3% to $25.99 a barrel on the New York Mercantile Exchange after dropping as much as 11% earlier. The contract surged 32% last week.
— With assistance by Dan Murtaugh
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