Oil prices fall 2 per cent, supply overhang back in focus DEVIKA KRISHNA KUMAR
Oil prices were down 2 per cent on Monday as supply
overhang concerns grew after a Saudi-Venezuela meeting at
the weekend showed few signs of co-ordination to boost
prices.
No tangible signs emerged from a meeting on Sunday between
Saudi Arabia’s oil minister Ali al-Naimi and his Venezuelan
counterpart that OPEC and non-OPEC suppliers were ready
to meet to discuss the price slump.
After a flurry of diplomacy over the last two weeks about a
possible production cut roiled oil markets, Sunday’s meeting
between cash-strapped Venezuela and the kingpin of the
Organization of the Petroleum Exporting Countries was seen
as “make or break” for a possible deal to boost prices that
have slumped 70 per cent since mid-2014.
Venezuela’s oil minister Eulogio Del Pino, who was on a tour of
oil producers to lobby for action to prop up prices, said his
meeting with Naimi was “productive.”
“But does ‘productive’ mean less production? The market thinks
not, at least right now,” said Phil Flynn, an analyst at Price
Futures Group in Chicago.
By noon, Brent crude was down 53 cents (U.S.), or 1.6 per
cent, at $33.53 a barrel, paring a fall of more than 3 per
cent earlier in the session.
U.S. crude slid 62 cents, or 2 per cent, to $30.27 a barrel,
also trimming losses after a drop of more than 4 per cent
earlier.
“With the possibility of a production cutting deal quickly fading
into the sunset, market participants are once again left to
focus on the reality of the oversupplied global market,” Energy
Management Institute analyst Dominick Chirichella wrote in a
note.
Morgan Stanley warned the global supply overhang was
unlikely to start clearing before 2017.
“We see limited upside for Brent (and range-bound) pricing
over the next 12 months as the supply overhang is worked
off,” the bank said.
However, investors in Brent crude now hold more futures and
options contracts that bet on the price rising than at any time
since the InterContinental Exchange’s records began in 2011,
data from the exchange showed.
Money managers raised their net long position in Brent crude
futures and options by 31,346 contracts to 292,300 lots in
the week to Feb. 2.
France’s Total has, meanwhile, agreed to buy 160,000 barrels
per day (bpd) of Iranian crude for delivery in Europe, official
news agency SHANA quoted Iranian Oil Minister Bijan
Zanganeh as saying, showing Tehran’s determination to claw
back lost market share after the lifting of nuclear sanctions
against the OPEC producer.
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