Oil tumbles 4 percent; Saudi Arabia cools on output freeze

*Saudi oil minister, Ali al-Naimi.

*Saudi oil minister, Ali al-Naimi.

02 April 2016, London — Oil tumbled about 4 percent on Friday after a Saudi prince reportedly said the kingdom will not freeze output without Iran and other major producers doing so, and data showed the global crude glut was likely to grow.

The dollar .DXY firmed after stronger-than-expected U.S. jobs data, which also weighed on oil early in the first session of the second quarter. U.S. employment increased solidly in March and wages rebounded.

Brent crude LCOc1 was down $1.50, or 3.7 percent, to 39.27 a barrel by 1:32 p.m. ET. It was on track to lose 4 percent in the week, after ending the first quarter up 6 percent and March 15 percent higher.

U.S. crude CLc1 fell $1.30 to $37.04 a barrel. It was on track to a 6 percent drop on the week, after a first-quarter gain of 4 percent and March rally of 14 percent.

Prices barely reacted to data showing U.S. oil and gas rigs falling for a 15th straight week, reaching the lowest levels since at least the 1940s.

Over the past six weeks, oil rallied in a rebound from 12-year lows, after major producers within and outside the Organization of the Petroleum Exporting Countries floated the idea of freezing output at January’s highs.

But Saudi Deputy Crown Prince Mohammed bin Salman said on Thursday the OPEC kingpin will not join the program without the participation of Iran and other major producers, Bloomberg reported.

A meeting to discuss the production freeze has been scheduled in Doha, Qatar on April 17. Iran has maintained that it will not contribute to any freeze until its crude exports return to pre-sanction levels.

“I think the market interpreted the lack of Saudi reaction to the Iran position as meaning they are okay with the plan even if Iran is out,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

“So, now we’re back to being consistent with what the Saudi position has been the last two years: That they’re going to let the market decide supply-demand. To me, any freeze is just psychological. All will agree, but nobody will do anything.”

Saudi Arabia and Kuwait said this week they will resume production at the jointly operated 300,000-barrel-per-day Khafji field.

A Reuters monthly survey from this week showed OPEC output rose in March on higher supply from Iran after the lifting of sanctions and near-record exports from southern Iraq.
*Dmitry Zhdannikov, Simon Falush & Amanda Cooper; Editing by Dale Hudson, Jason Neely & David Gregorio – Reuters

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