Oil Plunges on Dampened Hope of Output Freeze Meeting

Oil prices plunged in North American trade Thursday on news that a meeting between OPEC and non-OPEC producers is unlikely to happen as Iran has not committed to the proposal. The meeting was rumored to be scheduled for March 20.

In London, Brent oil for May delivery fell $1.08 (2.56%) to $40.01 a barrel. Earlier in the week, Brent soared to $41.47 a barrel, a three-month high, amid hopes of a meeting between major oil producers to potentially freeze output.

Brent futures are still up by 30% since February, when prices briefly dropped to under $30 a barrel.

U.S. Crude for April delivery lost 77 cents (2.01%), trading at $37.52 a barrel. Oil futures rallied yesterday to $38.51, the most since December, before settling down to $38.29 at the close of the session.

Gains on Wednesday came after weekly supply data showed demand for distillates and gasoline was much higher than expected, despite oil stockpiles swelling above 520 million barrels.

OPEC officials have stated that a meeting would take place on March 20 in Moscow as part of an effort to come to an agreement on freezing output at January levels. However, Iran has yet to commit to the proposal. Tehran feels that it should be exempt from the agreement as Iran hopes to recover the market share it lost while under Western sanctions.

On Tuesday, Kuwait stated that it would commit to the deal, but only if all major producers, including Iran, did the same.

Speculation of an output freeze has supported oil prices, which have plummeted since mid-2014 due to a supply glut. Brent crude was above $40 a barrel on Thursday, 50% higher than the 12-year low it reached in January.

OPEC’s Gulf members prefer the meeting to take place in early April in Doha or another city in the Gulf. Other OPEC delegates say they expect no progress until OPEC’s scheduled meeting in June.

Tehran has rejected the proposal to freeze output at January levels, and will make an effort to pre-sanctions production.

The issue will be discussed when Russia’s Energy Minister meets his Iranian counterpart on Monday in Tehran.

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Daniel Simmons