Oil ex­tends de­cline as Iran calls freeze pro­posal ‘ridicu­lous’

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OIL ex­tended de­clines af­ter Iran said a pro­posal by Saudi Ara­bia and Rus­sia for pro­duc­ers to freeze out­put was “ridicu­lous,” as the Per­sian Gulf na­tion seeks to boost ex­ports af­ter years of sanc­tions.

Fu­tures slid as much as 2.4 per­cent in New York. The pro­posal to cap out­put at Jan­uary lev­els puts “un­re­al­is­tic de­mands” on Iran, Oil Min­is­ter Bi­jan Nam­dar Zan­ganeh said on Tues­day, ac­cord­ing to the min­istry’s news agency Shana. Ali al- Naimi, his coun­ter­part from Saudi Ara­bia, said at a con­fer­ence in Hous­ton high- cost pro­duc­ers should bear the bur­den of re­duc­ing the cur­rent sur­plus and reaf­firmed the king­dom’s com­mit­ment to last week’s ac­cord.

“There won’t be a pact on out­put. There’s no pos­si­bil­ity of that oc­cur­ring be­cause there are in­suf­fi­cient lev­els of trust,” Michael McCarthy, a chief strate­gist at CMC Mar­kets in Syd­ney, said by phone. “The mar­ket is still in sur­plus and will re­main that way for some time.”

Crude is down 16 per­cent this year on spec­u­la­tion a global glut will per­sist amid the out­look for in­creased ship­ments from Iran and brim­ming US sup­plies, which are at the high­est level in more than eight decades. The na­tion’s stock­piles ex­panded by 7.1 mil­lion bar­rels last week, the in­dus­try-funded Amer­i­can Pe­tro­leum In­sti­tute was said to

re­port on Tues­day. West Texas In­ter­me­di­ate ( WTI) for April de­liv­ery fell as much as 77 cents to $31.10 a bar­rel on the New York Mer­can­tile Ex­change and was at $31.11 at 12:02 p.m. Hong Kong time. The con­tract for that month lost $1.52, or 4.6 per­cent, to $31.87 on Tues­day. To­tal vol­ume traded was about 33 per­cent above the 100-day av­er­age. Prices lost 30 per­cent last year.

Brent for April set­tle­ment slid as much as 49 cents, or 1.5 per­cent, to $32.78 a bar­rel on the Lon­don- based ICE Fu­tures Europe ex­change. Prices fell $1.42 to $33.27 on Tues­day. The Euro­pean bench­mark crude traded at a pre­mium of $1.67 to WTI.

“We are in the sit­u­a­tion where we will con­tinue to have an over­sup­plied mar­ket,” Vic­tor Shum, a vice pres­i­dent for Asia Pa­cific at IHS Inc., said in a Bloomberg Tele­vi­sion in­ter­view on Wed­nes­day. “In the com­ing weeks and months, oil prices will likely be low.”

Saudi Ara­bia, Rus­sia, Venezuela and Qatar reached a pre­lim­i­nary agree­ment in Doha to freeze out­put if other states join them. The ac­cord marks “the be­gin­ning of a process” that will con­tinue with fur­ther talks be­tween pro­duc­ing coun­tries in March, ac­cord­ing to al-Naimi. Iran is seek­ing to boost pro­duc­tion by 1 mil­lion bar­rels a day this year af­ter sanc­tions were lifted last month.

Saudi Ara­bia won’t re­duce pro­duc­tion be­cause it doesn’t trust other coun­tries to join in, al-Naimi said in Hous­ton. Cut­ting low cost out­put to sub­si­dize higher cost sup­plies only de­lays an “in­evitable reck­on­ing,” he said.

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