Oil below $40 as Iran dashes hopes for deal

The Pak Banker - - MARKETS/SPORTS -

Oil fell around 2 per­cent on Mon­day af­ter Iran dashed hopes that there would be a co­or­di­nated pro­duc­tion freeze any time soon, re­turn­ing bear­ish sen­ti­ment to the mar­ket over a sup­ply glut that has sent prices crash­ing.

Global bench­mark Brent crude fu­tures fell back below $40 a bar­rel, trad­ing at $39.69 at 0903 GMT, down 70 cents on Fri­day's close. Brent hit a 12year low of $27.10 in Jan­uary.

U.S. crude was down 79 cents at $37.71 a bar­rel. "Oil is down be­cause Iran said they would only join the out­put freeze group once they reached pro­duc­tion of 4 mil­lion bar­rels a day (bpd)," said Ta­mas Varga, oil an­a­lyst at Lon­don bro­ker­age PVM Oil As­so­ciates.

Iran's oil ex­ports are due to reach 2 mil­lion bpd in the Ira­nian month that ends on March 19, up from 1.75 mil­lion in the pre­vi­ous month, Iran's oil min­is­ter Bi­jan Zan­ganeh said on Sun­day.

Zan­ganeh poured cold wa­ter over hopes for a quick deal on freez­ing pro­duc­tion, say­ing the OPEC mem­ber would join dis­cus­sions only once its own out­put reached 4 mil­lion bpd. Zan­ganeh is to meet his Rus­sian coun­ter­part Alexan­der No­vak in Tehran on Mon­day, ac­cord­ing to news agency re­ports.

Saudi Ara­bia ap­peared to have stuck to a pre­lim­i­nary deal with some other pro­duc­ers to freeze out­put as its crude pro­duc­tion held steady in Fe­bru­ary at 10.22 mil­lion bpd, an in­dus­try source told Reuters.

Wor­ries about de­mand fun­da­men­tals also moved back into the spot­light as in­vest­ment bank Mor­gan Stan­ley warned that a slow­ing global econ­omy and high pro­duc­tion would pre­vent any sharp rises in oil prices. "Oil prices now seem to have bot­tomed, even though they are likely to stay sub­dued for the rest of this year be­fore start­ing to move higher in 2017," the U.S. bank said in a re­search note, adding that cheap oil had not pro­vided the boost to growth that many had hoped for.

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