Oil extends losses under $40

World oil prices sank on Tuesday, sliding further below $40 per barrel, as hopes faded that major crude producers would freeze output levels to ease a world surplus.

Around 1200 GMT, US benchmark West Texas Intermediate (WTI) for delivery in April was down 81 cents at $36.37 per barrel.

Brent North Sea crude for May delivery sank 96 cents to $38.57 per barrel compared with Monday’s close.

A meeting proposed by Russia and Saudi Arabia to discuss output limits has been pushed back to April from March 20, after signs that some key producing nations do not support the move.

Oil prices slid Monday after Iran reportedly signalled it would not join the effort until its own crude production reached pre-sanction levels of 4.0 million barrels per day.

“Over the last few days the oil price has appeared to struggle to gain a foothold above the $40 a barrel level, largely due to the reluctance of Iran to join other oil producers in capping their production levels,” said CMC Markets analyst Michael Hewson.

“Their insistence that they would only do so once they had returned to pre-sanctions levels, a stance endorsed by Russia, saw prices drop sharply yesterday.”

WTI had slumped 3.4 percent and Brent dipped 2.1 percent on Monday, giving up gains that saw the global benchmark break $40 a barrel for the first time this year.

“I remain sceptical on any such supply talks as the probability of any definitive action is unlikely to be high,” said analyst Bernard Aw at IG Markets in Singapore.

Even if the talks happen, the meeting’s agenda is freezing production levels — a stop gap measure — rather than the more long-term goal of cutting output to reduce the global crude oversupply, Aw noted.

“What I fear is that any breakdowns in the proposed talks, if there even is a meeting, will drag oil prices through the mud again,” he said.

The talks were supposed to be held in Russia this month, but are now set to happen next month in Doha, Qatar.

Singapore trade minister S. Iswaran told a gas conference Tuesday that crude prices are likely to remain $30-$50 per barrel this year due to oversupply, a slowing Chinese economy and Japan restarting nuclear power plants.

Traders are also watching for US economic data and a meeting of US Federal Reserve policy makers starting Tuesday for clues on whether they will announce another interest rate hike.

A rate increase is a boost to the dollar, which would make dollar-priced oil more expensive, hurting demand and prices. The Fed raised rates for the first time in nearly a decade in December.