Oil prices plunged on Monday after the world’s top producers failed to reach an agreement on capping output aimed at easing a global supply glut during a meeting in Doha.
Hopes the world’s main producer cartel, Organisation of Petroleum Exporting Countries (OPEC), and other major exporters like Russia would agree to freeze output has helped scrap oil prices of the 13-year lows they touched in February.
But crude tanked after top producer Saudi Arabia walked away from the talks, which many hoped would ease a huge surplus in world supplies, because of a boycott by its rival Iran.
Oil tumbled in early Asian trade after the collapse of Sunday’s talks, with prices dropping as much as 7% in opening deals.
At around 0100 GMT, the US benchmark West Texas Intermediate (WTI) for May delivery was down $2.11, or 5.23%, from Friday’s close at $38.25 a barrel.
Global benchmark Brent crude for June lost 4.71%, or $2.03, to $41.07.
“Despite many of the 18 oil producers believing the meeting in Doha was merely a rubber stamp affair for an oil production freeze, Saudi Arabia managed to throw a spanner in the works,” said Angus Nicholson, an analyst at IG Markets.
“With Saudi Arabia fighting proxy wars with Iran in Yemen and Syria/Iraq, it is understandable that they had little inclination to freeze their own production and make way for newly sanctions-free Iran to increase their market share.”
Members of the Organisation of the Petroleum Exporting Countries (OPEC) and other big producers have been seeking to ease a slump in oil prices that has cost them billions of dollars in lost revenue.
Major exporters around the world, from Nigeria to Venezuela and even kingpin Saudi Arabia, have suffered as prices have slumped to less than half their peak in mid-2014.
But Iran, which only recently returned to world oil markets after the lifting of Western sanctions in January, has ruled out capping its own production as it seeks to regain market share.
The opinion had been split over whether a deal on Sunday would be enough to tackle the global oversupply, which is also down to slowing demand in major consumer China and burgeoning US shale production.
“If oil holds above… $35, it will be clear that price gains in recent months have been mainly about the outlook for lower non-OPEC production and a weaker US dollar,” said Ric Spooner, chief market analyst at CMC Markets.