(Bloomberg) — Oil gave up some of last week’s rally after a delay to a planned meeting of top producers to discuss output curbs and signs the U.S. won’t join any deal raised doubts over the prospects for an agreement.
Futures dropped around 4% in New York after surging by more than a third of their value over the previous two sessions as a production accord started to take shape. However, a virtual gathering of the OPEC+ alliance that was originally scheduled for Monday was postponed to Thursday as Saudi Arabia and Russia traded barbs over who was to blame for the collapse in oil prices.
Some progress was made toward an agreement on Sunday, according to diplomats, but the lack of participation from the U.S. — the world’s largest producer — could prove to be a stumbling block. Despite originally calling for the deal, President Donald Trump on Saturday described OPEC as a cartel and threatened tariffs on foreign oil. Trump said late Sunday in Washington that he could impose “very substantial” levies but doesn’t think he’ll need to.
The aim of the talks is to cut production by about 10 million barrels a day, around 10% of global production. But whether that can support prices that have fallen by more than half this year as the coronavirus crippled the global economy is questionable. The International Energy Agency said Friday the deepest cuts in the industry’s history wouldn’t be enough to calm the market.
“The likelihood of a deal being done is extremely low,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “Certainly the type of agreement you’d need to stabilize the market is a long shot given how much demand has been hit.”
West Texas Intermediate declined 3.9% to $27.23 a barrel on the New York Mercantile Exchange as of 11:18 a.m. in Singapore after dropping to $25.28 earlier. The contract surged 32% last week and has fallen 55% in 2020.
Brent crude fell 2.4% to $33.29 a barrel on the ICE Futures Europe exchange. It rallied 37% last week and is down 50% so far this year. The contract’s six-month contango deepened to around $5 a barrel from $3.96 on Friday, indicating an abundance of supply.
Trump walked out of a meeting with the titans of America’s oil industry on Friday without any public declaration of a plan to curtail domestic output, calling into question his ability to broker a truce between Riyadh and Moscow.
Oil diplomats are now trying to stitch together a meeting of G20 energy ministers for Friday, part of an effort to bring the U.S. on board, according to two people familiar with the situation. While both Saudi Arabia and Russia have expressed openness to coordinated production cuts, it’s unclear that can be achieved without the U.S. and other nations also taking part.
A deal to curb production is likely to happen, Stephen Innes, chief Asia market strategist at AxiCorp Ltd., said in a note released Monday. But cuts may not be enough to address the near- or medium-term oversupply, he said.
Meanwhile, Saudi Aramco is delaying the release of its closely-watched monthly oil-pricing list until Thursday to wait for the outcome of the OPEC+ meeting, according to people with knowledge of the situation. The official selling prices were due on Sunday.