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Oil drops on skepticism of potential producer deal
[NEW YORK] Oil prices fell on Friday as the market took a more skeptical view of producer talks to limit output that had lifted prices earlier in the week.
US benchmark West Texas Intermediate for March delivery fell US$1.13 to US$29.64 a barrel on the New York Mercantile Exchange.
Brent North Sea oil for April delivery dropped US$1.27 to US$33.01 a barrel in London.
Oil prices rallied strongly on Wednesday and early on Thursday following talks by major producers on a potential agreement to limit production in response to crashing prices.
Saudi Arabia and Russia agreed to freeze production if other producers followed suit. Iran expressed broad support for the initiative but stopped short of agreeing to limit output.
Analysts said the market has shifted from its initial enthusiasm view to more of a show-me stance.
"We're really going to have to wait and see whether Opec is actually going to freeze production or whether it was just talk during the past week," said Andy Lipow of consultancy Lipow Oil Associates.
Tim Evans, analyst at Citi Futures, said the market has adopted a more "clear-eyed view" of the negotiations.
"In terms of production, it actually means a status quo that leaves a large surplus in place," Mr Evans said. "It may mark some increased interest in producer dialogue that could lead to results later, but at this stage we should note that's a speculation, not a reliable support."
Analysts said sentiment was also dented by US petroleum inventory data released Thursday that showed a 2.1 million barrel increase in US commercial inventories, along with sizable increases in gasoline and other refined products.