Oil edges lower after Kuwait dents hopes for output freeze
Oil prices edged lower on Tuesday after Kuwait said it would only agree to an output freeze if all major producers take part and Goldman Sachs analysts poured cold water over the prospects for a sustained rally. Brent crude futures LOCc1 were down 12 cents at $40.72 a barrel at 0922 GMT, hovering above the $40 mark it last traded at three months ago. On Monday the contract had climbed by 5.5 percent in intra-day trading and it has gained about 50 percent since Jan. 20.
U.S. West Texas Intermediate (WTI) futures were down 10 cents at $37.80 a barrel. "Prices are lower on the Goldman Sachs and Kuwaiti comments and the oil market remains oversupplied," said Tamas Varga, oil analyst at PVM in London.
Kuwait's oil minister said on Tuesday that his country's participation in an output freeze would require all major oil produc- ers, including Iran, to be on board.
"I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh told reporters in Kuwait City. OPEC member Kuwait is currently producing 3 million barrels of oil per day, he added. On Monday the Ecuadorean government said that Latin American oil producers would meet on Friday to coordinate a strategy to halt the crude price rout.
Tuesday's report by Goldman Sachs said that a recent surge in commodity prices was premature and unsustainable. "While these dynamics (rising prices) could run further, they simply are not sustainable in the current environment," the analysts wrote. "Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating, as it did last spring."
On the demand side, China's crude imports jumped 19.1 percent between January and February to 31.80 million tonnes, or about 8 million barrels per day, despite overall weak trading figures released on Tuesday. "Higher 'teapot' (independent refinery) demand and stronger refining margins ... have contributed to increased imports. Falling domestic crude production is also supportive," said Virendra Chauhan of Energy Aspects.
Despite strong oil demand, questions about the sustainability of growing consumption weighed on markets after China's overall exports tumbled by a quarter in February. China's February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year on year, data from the country's Passenger Car Association showed. "This is really a poor start for trade this year," said Zhang Yongjun, senior economist at the China Centre for International Economic Exchanges.