Oil falls as investors turn cool on production freeze deal
LONDON Oil fell on Monday as investors ditched some of their bullish bets on another price rise and the chances that top exporters will agree to rein in overproduction appeared to fade.
Iran will continue increasing oil production and exports until it reaches the market position it enjoyed before the imposition of sanctions, Oil Minister Bijan Zanganeh was quoted by the semi-official Mehr news agency as saying.
Saudi Arabia, which spearheaded an initial proposal in February for producers to limit output, said last week it would not join any effort to do so unless Iran were on board, while Russia reported its highest oil production in 30 years.
This has cast doubt on the ability of the world’s largest exporters to reach any such agreement when they meet this month in Doha to discuss how best to align global supply and demand.
Hedge funds last week cut their bullish holdings of crude oil futures for the first time in six weeks.
Brent crude futures were down 28 cents at $38.39 a barrel by 0845 GMT, having risen by at least 40 percent since mid-February, while U.S. crude futures were down 38 cents at $36.41 a barrel.
“It’s not very strange to see a wave of profit-taking and some unwinding of long positions, and some people even saying they could reposition for a move towards lower prices,” ABN Amro chief energy economist Hans van Cleef said.
“That’s part of a normal cycle that I think can continue this week, we might see $36 or $37 … Prices are coming down because of speculation Saudi Arabia will not join (the freeze deal) and that’s probably what we’ll see over the next three weeks – more speculation and more verbal intervention.”
Oil prices have fallen more than 65 percent since mid-2014, when booming U.S. shale oil output and supply from within and outside OPEC created one of the largest global surpluses of crude in modern times.
U.S. production is proving more resilient to low oil prices than many expected, despite steep cuts in drilling for new reserves as well as a jump in bankruptcies.
“The current rig count implies U.S. production … would decrease by 705,000 barrels per day yoy (year-on-year) on average in 2016, and by 375,000 barrels per day yoy in 2017,” Goldman Sachs said.
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson)