Oil Drops After Saudis Say Will Freeze Output Only If Iran Joins

Oil-drilling

(Bloomberg) — Oil extended declines after Saudi Arabia’s deputy crown prince said the kingdom will freeze output only if Iran follows suit, putting in doubt the success of a proposed deal between major producers.

Futures declined as much as 1.7 percent in New York after a 4 percent drop on Friday. Saudi Arabia’s Mohammed bin Salman signaled in a interview with Bloomberg that if any country raises output, his nation will also boost sales. With producers scheduled to meet this month to discuss a pact on capping supplies, Iran’s oil minister said he’ll attend the gathering if he finds the time. Russian oil production set a post-Soviet high in March.

Oil climbed 14 percent in March after rebounding from a 12-year low this year amid speculation a global glut will ease as U.S. output falls. While Saudi Arabia, Russia, Venezuela and Qatar in February first proposed an accord to cap production to reduce the worldwide surplus and boost prices, Iran has said it plans to increase sales after international sanctions were removed following a deal to curb the Persian Gulf state’s nuclear program.

“Salman’s comment seems to be a warning to anyone looking to take advantage of an output freeze without having to cut production,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “Russia’s output boost can be seen as a strategic move as it tries to increase production as much as it can before any potential output freeze kicks in.”

Russian Output

West Texas Intermediate for May delivery dropped as much as 61 cents to $36.18 a barrel on the New York Mercantile Exchange, and traded at $36.35 at 7:56 a.m. London time. The contract fell $1.55 to $36.79 on Friday. Total volume traded was about 2 percent above the 100-day average.

Brent for June settlement lost as much as 1.3 percent to $38.18 a barrel on the London-based ICE Futures Europe exchange. The contract fell $1.66, or 4.1 percent, to $38.67 on Friday. The global benchmark crude traded at a 57 cent premium to WTI for June delivery.

Russian production of crude and a light oil called condensate climbed 2.1 percent in March from a year earlier to 10.912 million barrels a day, according to the Energy Ministry’s CDU-TEK unit. That narrowly beat the previous high of 10.910 million barrels in January. Exports rose 5.1 percent from a year earlier to 5.59 million barrels a day in March.

Other news:

Short positions on WTI, or bets that prices will fall, rose the most since November in the week ended March 29, according to U.S. Commodity Futures Trading Commission.

Abu Dhabi National Oil Co. sees continued volatility in the short term and expects a slow rise in prices in the medium term, Sultan Al Jaber, minister of state and Adnoc CEO, said in interviews with The National and Al Ittihad.

Libya’s Petroleum Facilities Guard clashed with Islamic State militants near an oil field, leaving five members dead and 16 wounded, PFG spokesman Ali al-Hasy said.

–With assistance from James Paton To contact the reporter on this story: Heesu Lee in Seoul at hlee425@bloomberg.net. To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Aaron Clark

©2016 Bloomberg L.P.f

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