Oil slumps 4% as Saudi Arabia reaffirms no output cut

Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali Ibrahim Naimi speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, on June 5, 2015. Oil prices fell again after Naimi said on Feb. 23, 2015, that Saudi Arabia would not cut production. AP

NEW YORK, United States — Oil prices slumped Tuesday after Opec kingpin Saudi Arabia’s oil minister reaffirmed opposition to a production cut to address global oversupply, expressing hope only for an output freeze next month.

US benchmark West Texas Intermediate for delivery in April tumbled $1.52 (4.6 percent) to $31.87 a barrel on the contract’s first day of trade on the New York Mercantile Exchange.

In London, Brent North Sea crude for April, the European benchmark for crude oil, finished the session at $33.27 a barrel, down $1.42 (4.1 percent) from Monday’s settlement.

READ: Asian stock markets mostly weaker as oil turns lower | 25 years later, Gulf War still shapes tiny, oil-rich Kuwait

Matt Smith of ClipperData said the market rallied too much Monday on a report from the International Energy Agency “that was just less bearish than expected and nothing more than that.”

“And today we’re selling off far stronger than we really should after (Saudi Oil Minister Ali) Al-Naimi has a similar tone that we’ve heard from him over the past year.”

Naimi, speaking at a Houston energy conference, said freezing output was more realistic than cutting because “not many countries are going to deliver, even if they say they will cut production.”

Naimi expressed hope that other producers would join a tentative freeze to January output levels it had agreed with Russia, Qatar and Venezuela last week.

Naimi said that “hopefully sometime in March, there will be another meeting and probably (we’ll) gather more agreements on freezing.”

But Opec member Iran, which ramped up production in January in the wake of a nuclear agreement with major powers that lifted sanctions, criticized the idea of a freeze.

“Some neighboring countries have increased their production over the years to 10 million barrels per day and export this amount, then say let’s all freeze our oil production,” Iranian Oil Minister Bijan Zanganeh said, according to the ISNA news agency.

“They freeze production at 10 million bpd and we freeze at 1 million bpd. This is a very funny joke.”

Traders, meanwhile, were betting the US Department of Energy’s weekly petroleum inventories report Wednesday will show another increase in US crude stockpiles.

According to a poll of analysts by Bloomberg News, commercial crude supplies rose by three million barrels in the week ending February 19. In the prior week, they climbed by 2.1 million to a record 504.1 million barrels.