Oil prices fell on Monday, adding to Friday`s steep losses as doubts re-emerged over the ability of major producers to agree output cuts at a planned meeting on Wednesday aimed at reining in global oversupply, according to Reuters.
Brent crude futures LCOc1 fell 2 percent at one point, but regained ground to trade down 35 cents, or 0.74 percent, at $46.89 per barrel at 0749 GMT, as reported by Reuters.
U.S. West Texas Intermediate (WTI) crude futures CLc1 also retraced early loses and was trading down 38 cents, or 0.78 percent, at $45.70 a barrel.
Monday`s fall came amid choppy trading and after prices tumbled more than 3 percent on Friday on disagreement between OPEC and non-OPEC crude exporters like Russia over who should cut production by how much in order to curb a global supply overhang that has more than halved prices since 2014.
Despite the wrangling, traders said they still expected some form of an output restriction to be agreed this week.
”An agreement is needed to avoid (price) downside. So, the question is what kind of agreement will they do? The market is clearly very nervous… We shall see. I think they will reach some form of agreement,” said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.
The Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna on Wednesday to decide on the details of a cut, potentially including non-OPEC members like Russia. A meeting between OPEC and non-OPEC producers that was to be held on Monday was called off after Saudi Arabia declined to attend.
Saudi Arabia`s energy minister Khalid al-Falih said on Sunday that Saudi representatives would not attend the talks originally scheduled for Monday because no agreement within OPEC had been reached so far.
Falih said that the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.
Despite the disagreements among producers, Morgan Stanley said it still expected ”at least a paper deal agreement”.
Even if a cut is agreed, oversupply may not end soon.
In the United States, the oil rig count exploring for new production rose by three last week, and Goldman Sachs said that ”since its trough on May 27, 2016, producers have added 158 oil rigs (+50 percent) in the U.S.”
Eiichiro Kitahara, Executive Officer of Japanese refiner TonenGeneral Sekiyu K.K said that ”once oil prices reach above $60/barrel, (U.S.) shale oil producers are likely to resume operations, which will weigh on the market.”