Oil tumbles as Iran rejects output freeze deal

A man refuels his car at a petrol station in Tehran, Iran, on Jan 25, 2016.
A man refuels his car at a petrol station in Tehran, Iran, on Jan 25, 2016.PHOTO: REUTERS

NEW YORK (REUTERS) - Global oil prices fell as much as 4 per cent on Monday (March 14) on concerns a six-week market recovery has gone beyond fundamentals, as US crude stockpiles continue to mount and Iran maintains little interest in a global production freeze.

Oil minister Bijan Zanganeh said over the weekened that Iran would only join discussions to cap output after its production reached four million barrels per day, the BBC reported.

In February, Saudi Arabia struck a deal with Russia and other Opec nations to freeze oil output at January levels. But Iran wants production to hit pre-sanction levels before beginning talks.

Market intelligence firm Genscape meanwhile reported an inventory build of 585,854 barrels in Cushing, Oklahoma, taking the delivery hub for US crude futures closer to capacity, traders who saw the data said.

Investment bank Morgan Stanley predicted a US$25-US$45 trading range for US crude in an oversupplied but volatile market, concurring with several analysts' views.

"We feel that the bulk of this stronger than expected 5-6 week price advance has been seen and that prices will be shifting into a near term consolidation phase," said Jim Ritterbusch of Chicago energy consultancy Ritterbusch & Associates.

US crude was down US$1.60, or 4 per cent, at US$36.90 a barrel by 1511 GMT. It hit a three-month high of US$39.02 on Friday, surging from a 12-year low of US$26.05 a month earlier.

Brent was down US$1.10, or 2.8 per cent, at US$39.29 barrel. The benchmark fell to a 2003 low of US$27.10 in late January.

Some analysts expect a more bearish supply-demand picture when the US government issues weekly oil data on Wednesday. Last week's report showed a crude build of nearly 4 million barrels to above 521 million barrels, the fourth straight week of growing to record highs.

Money managers, including hedge funds, raised their bullish bets on US crude for a third week in a row to November highs, data showed on Friday, on conviction prices have bottomed after a near two-year selloff.

But in a sign investors were growing more sceptical about Brent, UK-based data showed on Monday that speculators had cut net long positions in the global crude benchmark by 9,500 contracts in the week to March 8.