World oil prices fell sharply on Monday after Iran reportedly announced over the weekend that it would not to join a proposed output freeze by crude producers.
Around 1200 GMT, US benchmark West Texas Intermediate (WTI) for delivery in April was down 88 cents at 37.62 a barrel.
Brent North Sea crude for May delivery sank 1.04 to 39.35 a barrel compared with Friday’s close.
“Iran made it clear at the weekend that it only intends to sign up to the oil production cap once it has reached a production level of 4.0 million barrels per day,” said Commerzbank analyst Carsten Fritsch.
“This reduces the chances of any wide-scale agreement on production caps. Kuwait for example had made Iran’s participation a condition for its own involvement.”
A March 20 meeting in Russia to discuss an output freeze seems increasingly unlikely if Iran does not participate in the talks, led by OPEC kingpin Saudi Arabia.
Russia and Saudi Arabia mooted the meeting after an increase in global production in January added to a supply glut that sent prices plunging, hitting 13-year lows on February 11 with US crude futures at 26.05 and Brent trading below 30.
Tehran is reported to have said that it would join a planned meeting between producer giants on output only after its output has reached pre-sanction levels of 4.0 million barrels per day.
Despite Monday’s losses, the oil market has rebounded in recent weeks, with WTI touching a three-month high and Brent breaching the 41 mark last Wednesday.
Inenco energy trader Dorian Lucas argued that the prospect of an output freeze was still curtailing losses for oil prices.
“The spectre of possible collaborative production cuts limited losses,” he said on Monday.
The Paris-based International Energy Agency said on Friday that oil prices may have “bottomed out” after a 20-month rout.
Phillip Futures analyst Daniel Ang said selling pressure set in Monday as traders took profit following last week’s rally.
“We are seeing a lot of testing at this price,” he told AFP.
“Traders are selling at a high level, which explains the prices dipping this morning. But some of it also comes from Iran’s announcement about not cutting back oil production,” he added.
Traders are also watching a meeting of US Federal Reserve policymakers on Tuesday and Wednesday, with attention on whether they will announce another interest rate hike.
A rate increase is a boost to the dollar, which would make dollar-priced oil more expensive, hurting demand.
The Fed raised rates for the first time in nearly a decade in December.
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