Oil drops after Saudis say will freeze output only if Iran joins

[SEOUL] 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 per cent in New York after a 4 per cent drop on Friday. Saudi Arabia's Mohammed bin Salman signalled 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 per cent in March after rebounding from a 12-year low this year amid speculation a global glut will ease as US 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." West Texas Intermediate for May delivery dropped as much as 61 cents to US$36.18 a barrel on the New York Mercantile Exchange, and traded at US$36.40 at 12:32 pm Seoul time. The contract fell US$1.55 to US$36.79 on Friday. Total volume traded was about 29 per cent above the 100-day average.

Brent for June settlement lost as much as 1.2 per cent to US$38.19 a barrel on the London-based ICE Futures Europe exchange. The contract fell US$1.66, or 4.1 per cent, to US$38.67 on Friday. The global benchmark crude traded at a 58 cent premium to WTI for June delivery.

Russian production of crude and a light oil called condensate climbed 2.1 per cent 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 per cent from a year earlier to 5.59 million barrels a day in March.


BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes