Prices of crude oil slipped 2 percent on Tuesday, following plunges from the last session as worries weighed, holding that a six week recovery may have reduced because of a continuous supply glut around the world.
News came after the Organization of Petroleum Exporting Countries reported that the global demand for its crude would be lower compared to what is expected in 2016 as supply from other producers proves more resilient to low prices, elevating the glut supply in the market this year.
The Organization of Petroleum Exporting Countries anticipates global demand for its crude oil to settle at 31.52 million barrels per day in 2016, slumping 90,000 barrels per day from the previous month’s estimate.
OPEC reported that it pumped 32.28 million barrels per day in February, declining about 175,000 barrels per day from January, particularly because of blackouts in Iraq and Nigeria.
However, ongoing high production figures mean that global output still rises faster than demand by at least 1 million barrels per day, which is dragging the market down.
Brent crude for May delivery on the ICE Futures Exchange staggered between $38.82 and $40.51 per barrel, before settling at $39.60, dipping 79 cents or 1.96 percent. North Sea crude futures have also climbed steeply over the last month after momentarily sinking below $30 per barrel in February.
Meanwhile, West Texas Intermediate crude futures for April delivery on the New York Mercantile Exchange declined 0.73 percent to $36.91 per barrel.
As stated by a market analyst, “With the focus still on an output agreement, oil markets are likely to remain susceptible to further sell-offs as producers baulk at cutting production.”
Adding to the oversupply, Saudi Arabia and non-OPEC member Russia, which are the world’s two biggest crude oil exporters, together with Venezuela and Qatar have proposed key producers that they should keep production output at January levels.
However, with United States crude stockpiles keep on hitting new records and Iran hinting little interest in cooperating to the freeze, market analysts anticipate no fundamental change to the glut in the near future.
Iranian oil minister Bijan Zanganeh had a meeting with energy minister Hamid Chitchian on Monday, as Russian minister Alexander Novak confirmed the Persian Gulf nation’s intentions to keep on pumping output before agreeing to any production freeze which could be supported by up to 10 large oil producers.
The remarks had a catch on developments in relation with the first potential deal between OPEC and non-OPEC members in 15 years. It came after Zanganeh said that Iran is currently not interested in agreeing to any deal until its production hits pre-sanction levels of nearly 4 million barrels per day.
According to Zanganeh, “I have already announced my view regarding the oil freeze and Im saying now that as long as we have not reached four million barrels per day in production, they should leave us alone.”
On the other hand, United States crude production jumped last week by 1,000 barrels per day to 9.078 barrels per day, ending a series of plunges for six weeks. Last June, United States crude output tacked on 9.6 million barrels per day, which is its highest level in at least 40 years.