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3/14/2016, 1:02 PM (Source: TeleTrader)
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Oil sinks below $40 as hopes for output freeze wane

Oil prices fell sharply on Monday, with expectations running low that Russian Energy Minister Alexander Novak could persuade his colleague in Iran to agree to a freeze in production. Russian official is scheduled to visit Tehran on Monday and meet Iranian Minister of Petroleum Bijan Zangeneh  to discuss "oil policies."

Iranian minister said on Sunday that Iran will take part in discussions with Russia and Saudi Arabia on oil productions freeze only after its daily output reaches twice the current number.

"I have already announced my view regarding the oil freeze and I'm saying now that as long as we have not reached 4 million (barrels per day) in production, they should leave us alone," said Bijan Zangeneh as quoted by the Iranian media.

Iran is in process of reacquiring its share of market after prolonged international sanctions were lifted in January, and is expected to reach 2 million barrels per day by March 20, at the end of month of Esfand in the Persian calendar. In previous month, Iran exported 1.75 million barrels.

The International Energy Agency (IEA) reported a fall in oil supplies by 180 thousand barrels per day in February, citing lower output from the producers both inside and outside the Organization of the Petroleum Exporting Countries (OPEC). However, the production stood 1.8 million barrels per day above a level recorded a year earlier, said IEA in its report on Friday.

The numbers in support to this come from Russia, as the country's Ministry of Energy reported exports in February at 43.064 million barrels, significantly below January's level of 46.141 million barrels.

The IEA also noted that China was shifting part of its imports away from Asia and taking more from Russia. "Shipping data suggest that China is importing more and more ESPO crude," referring to the East Siberian Pacific Ocean blend, exported via Kozmino terminal in the Russian Far East, while refineries in the north of China are using railway for imports of the Russian crude oil.

The international benchmark Brent for delivery in May traded 2.56% cheaper at $39.33 a barrel, while the U.S. light sweet crude WTI for delivery April fell 2.58% to $37.46 a barrel at the ICE Europe at 1:00 p.m. CET. The OPEC daily basket price of 13 crudes stood at $35.62 a barrel on Friday, compared with $35.23 the previous day.

Breaking the News / ZR