LONDON: Oil prices retreated Tuesday, with Brent crude back below $40 a barrel, after Kuwait reportedly ruled out cutting output, analysts said.
Prices had strengthened earlier in the day, extending recent strong gains won largely on hopes of oil production freezes to ease a global supply glut.
“Negative notes from Goldman Sachs and UBS (on the outlook for commodities) and, more importantly, a refusal from Kuwait to cut its oil output soon saw the commodity dip its toes back below $40 per barrel,” said Connor Campbell, analyst at Spreadex trading group.
Around 1730 GMT, Brent North Sea crude for delivery in May shed 88 cents to trade at $39.96 a barrel.
US benchmark West Texas Intermediate (WTI) for April delivery slumped $1.08 at $36.82 a barrel compared with Monday s close.
Brent had earlier Tuesday reached a three-month high at $41.48 a barrel.
Daniel Ang, an analyst with Phillip Futures, said a sustained increase would be driven only if producers took concrete steps to ease the oversupply.
“Prices have to be driven from fundamental change (to supply and demand). A cut in production or a concrete freeze… could cause prices to move up further,” he told AFP.
Saudi Arabia, Russia, Qatar and Venezuela last month agreed to freeze output at January levels if other producers followed suit.
United Arab Emirates energy minister Suhail Mazrouei on Monday said he believed producers were already freezing output.
But British bank Barclays cautioned against too much optimism.
“OPEC s production freeze policy is far from certain to succeed,” it said in a market commentary, referring to the Organization of the Petroleum Exporting Countries.
“The market is well aware that the countries that have so far signalled support for the policy are mostly producing at close to capacity.”
Barclays added: “The big risk is that… prices fall back sharply on any lack of further progress.”
Crude futures continued to grow meanwhile despite China releasing data showing another hefty slump in exports.
But mining share prices were hit hard on demand jitters because China is a leading consumer of raw materials. – (AFP)
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