LONDON • Oil prices slumped heavily yesterday after a meeting of major producing nations on a proposed output freeze fell apart, leaving the world grappling with an excess of unwanted crude oil.
Some analysts now believe crude oil is headed back down towards US$30 a barrel.
The 18 oil-exporting nations, including Russia - which is not part of the Organisation of Petroleum Exporting Countries (Opec) - had gathered in the Qatari capital of Doha for what was expected to be the rubber- stamping of a deal to stabilise output at January levels until October.
But the deal crumbled when Opec heavyweight Saudi Arabia demanded that Iran join in despite repeated assertions that it would not do so until it had reached pre-sanction levels of output.
"Saudi Arabia intentionally torpedoed the agreement and was willing to accept its failure. This has severely damaged the credibility of oil producers in general and of Opec in particular," Commerzbank said in a note.
Brent crude dropped 2.7 per cent to US$41.96 a barrel, while US benchmark West Texas Intermediate was 2.7 per cent lower at US$39.26 a barrel as of 11.29am London time (6.29pm Singapore time).
Oil futures traded on the New York Mercantile Exchange fell as much as 6.8 per cent, the biggest intra-day drop since Feb 1.
"The oil price will reset lower and could even retest US$30 over the next three months," said Mr James Purcell, a cross-asset strategist at UBS Group AG's wealth management business in Hong Kong. "Short term, that will dampen enthusiasm for risk assets."
Major- and emerging-market currencies dropped as crude tumbled. The Malaysian ringgit fell the most in two weeks, by 0.6 per cent to 3.9265 against the greenback. It was trading at 2.8986 against the Singapore dollar.
"The ringgit's near-term fortunes are heavily tied to oil-price developments," said ANZ senior currency strategist Khoon Goh. "It really depends on whether oil prices can stabilise or continue to fall."
As the Australian dollar, British pound and Russian rouble also fell, foreign-exchange traders sought safety in Japan's currency as the yen rose towards a 17-month high.
Most South-east Asian bourses ended lower as falling oil prices hurt investor sentiment.
But the Thai market bucked the trend because of retail buying after nearly a week of holidays and the Jakarta Composite index gained.
The Straits Times Index was down 0.21 per cent after falling as much as 1.1 per cent in early trade. Malaysia closed 0.6 per cent lower after weakening more than 1 per cent and Philippine shares closed down 1.1 per cent.
Meanwhile, Iran urged other oil producers yesterday to continue talks on an output freeze to prop up crude prices, but insisted it was justified in not freezing its own output.
Iranian Opec governor Hossein Kazempour Ardebili said Iran had made it clear that it wanted to regain its share of the oil market lost when it was hit by economic sanctions, and that "its position is supported by most Opec and non-Opec members around the world".
The sanctions were lifted in January after Iran and a group of world powers agreed on curbs to Teheran's nuclear programme.