Oil falls after Saudi Arabia, Russia delay meeting

NEW YORK (Reuters) – Oil prices slumped on Monday, pulling back from last week’s gains after Saudi Arabia and Russia delayed a meeting of oil producers aimed at resolving growing worldwide oversupply as the coronavirus pandemic pummels demand.

The global oil market rebounded last week after sources at the Organization of the Petroleum Exporting Countries and its allies, including Russia, said they were willing to come together to cut supply, though they want participation from the United States and others.

However, the meeting of the OPEC+ group, originally scheduled for Monday, has been delayed to Thursday as the sniping between Russia and Saudi Arabia over last month’s collapse of an existing supply-cut agreement continued. Fuel demand is down by roughly 30% worldwide while those nations are flooding markets with unneeded supply.

“The three-day delay in the virtual OPEC+ meeting that had been scheduled for (Monday) likely reduces the chances of a meaningful production agreement by at least 50%,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Brent futures LCOc1 fell $1.90, or 5.7%, to $32.18 a barrel by 11:25 a.m. EDT (1525 GMT), while U.S. West Texas Intermediate crude (WTI) CLc1 fell $2.02, or 7.1%, to $26.34.

The market was also weighed down by a report from data provider Genscape that inventories at the Cushing storage hub in Oklahoma, the delivery point for WTI, rose by about 5.8 million barrels last week, traders said.

If those figures are matched by official U.S. Energy Information Administration data, it would be the fifth straight weekly storage build at the hub and the biggest weekly increase on record dating to 2004. [EIA/S] USOICC=ECI ENERGYUSA

Graphic – Oil prices: here

U.S. Energy Secretary Dan Brouillette said on Monday that after speaking with the energy ministers of Saudi Arabia and Russia he believes the countries will cut oil output and end their war over market share this week.

Kremlin spokesman Dmitry Peskov also said Moscow was ready to coordinate with other oil exporting countries to help stabilise the market and that the OPEC+ meeting was delayed for technical reasons.

OPEC+ is working on a deal to cut production by about 10% of world supply, or 10 million barrels per day (bpd), but members states want that to be a global effort, one that would pull in nations that do not normally restrict supply of private oil companies, particularly world production leader the United States.

But Rystad Energy’s head of oil markets Bjornar Tonhaugen said even if the group agrees to cut up to 15 million bpd, “it will only be enough to scratch the surface of the more than 23 million bpd supply overhang predicted for April 2020.”

Monday’s slump in crude benchmarks came after a strong surge on April 2-3, with Brent gaining 38% and WTI 40% over the two days as the market reacted to U.S. President Donald Trump’s tweets that a deal to cut output was imminent.

Graphic – Goldman Sachs on oil demand destruction: here