Saturday, April 26, 2025
9:43 AM
Doha,Qatar
Exxon

Oil slides nearly 6% as hopes for output cut fade

* "Highly unlikely" Opec, Russia will cooperate - Goldman

* US crude stocks likely hit record last week - Reuters poll

* BP and Exxon report worst results in more than a decade

Oil fell on Tuesday, with US crude briefly slipping below $30, dented by worries about demand amid a mild winter and concerns of rising supply as hopes for a deal between Opec and Russia on output cuts fade.

Brent for April delivery was down $1.09 at $33.15 a barrel by 10:57 a.m. EST (1557 GMT), after touching a low of $32.23, down 5.9%, in the session.

The front-month contract for US West Texas Intermediate (WTI) was down $1.18 at $30.44 per barrel after falling to as low as $29.81.

The oil market rallied for four straight days last week after Russia's Energy Minister said Opec member Saudi Arabia suggested a production cut to tackle one of the worst supply gluts in history.

Industry watchers have been sceptical of a deal, particularly as Iran looks to boost production and market share after the lifting of sanctions.

Goldman Sachs said it was "highly unlikely" the Organization of the Petroleum Exporting Countries would cooperate with Russia to cut output, saying such a move would also be self-defeating as stronger prices would bring previously shelved production back to the market.

"It's hard to see a successful agreement between Opec and Russia to cut production and people are starting to see that," said Andy Sommer, senior energy analyst at Axpo Trading in Dietikon, Switzerland.

Goldman and others have said oil could slip below $30 as the market tries to rebalance itself.

Forecasts for mild weather over the next couple of weeks and the looming onset of spring has also weighed on oil prices, sending US heating oil futures down 2% and US gasoline futures down more than 5%.

US shale producers, seen as resilient in the face of plunging prices, expanded capital spending cuts last week, in what most believed was a sign of capitulation.

Stockpiles are still on the rise, leading many to speculate that global storage may be close to capacity.

"Prices could stay in the twenties until we see some reaction on the supply side," said Thomas Saal, analyst at INTL FC Stone in Miami, Florida.

"I see the data and production is still healthy. There are no drastic cutbacks. Even though there's some financial trouble, the question is, will they continue to produce even if they have trouble meeting their obligations."

Underlining the well-supplied nature of the market, Russia's oil output rose to 10.88mn barrels per day (bpd) in January, data showed on Tuesday.

US commercial crude oil inventories likely rose by 4.7mn barrels last week to a new record, a Reuters survey taken ahead of industry and official data showed.

The American Petroleum Institute releases its weekly inventory report later on Tuesday, while data from the US government's Energy Information Administration is due on Wednesday.

The tumbling crude price has hit oil majors, with BP slumping to its worst annual loss in more than 20 years last year. Exxon, the world's largest publicly traded oil company, reported a 58% fall in quarterly profit and said it would cut spending in 2016 by a quarter.  

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