Oil dropped on speculation that a pledge by Saudi Arabia and Russia to freeze production at January levels won’t succeed in tackling the global oil surplus.
Crude fell after climbing as much as 7.1 percent in New York. The agreement depends on other producers following suit, Qatar’s Energy Minister Mohammed bin Saleh al-Sada said in Doha Tuesday. The pact won’t be meaningful unless Iran and Iraq, which have been raising output, cooperate, Commerzbank said.
Saudi Arabia’s Ali al-Naimi said the freeze could be followed by other steps to improve the market.
“The market is reacting rationally,” said Mike Wittner, head of oil-market research in New York at Societe Generale. “There’s been a lot of chatter about a possible cut over the last month, so the reaction has got to be: Is this the best we can do? I struggle to find anything bullish in this announcement.”
Venezuela has lobbied exporters including Russia, Iran and Saudi Arabia to arrange a meeting between OPEC members and other suppliers in an attempt to reach an agreement to balance the market. Brent crude is still down about 12 percent this year amid the outlook for increased Iranian exports. BP Plc predicts the market will remain “tough and choppy” in the first half as it contends with a surplus of 1 million barrels a day.
West Texas Intermediate oil for March delivery fell 33 cents, or 1.1 percent, to $29.11 a barrel at 1:05 p.m. on the New York Mercantile Exchange. There was no settlement Monday because of the U.S. Presidents Day holiday. Trades will be booked Tuesday for settlement purposes. Total volume traded was almost double the 100-day average.
Brent for April settlement slipped 96 cents, or 2.9 percent, to $32.43 a barrel on the ICE Futures Europe exchange. It climbed as much as $2.16 to $35.55 earlier. The European benchmark oil was at a $1.35 premium to April WTI.
