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LONDON: Oil tumbled Monday a day after top producers failed to reach a deal in Doha to cap output, fanning fresh fears over a supply glut that has plagued the market.
Prices had rebounded last week on hopes the Opec exporters’ club and other major players, including Russia, would agree to freeze output levels at Sunday’s meeting.
However, discussions in the Qatari capital floundered and a deal to curb abundant global oil supplies failed to materialise, sending the market lower once again.
Shortly before 1500 GMT, US benchmark West Texas Intermediate for delivery in May sank $1.08 to $39.28 per barrel. Brent crude for June delivery lost 95 cents at $42.15.
The Doha failure “has raised the fear that the current glut and oversupply issue is never going to be solved”, GKFX analyst James Hughes told AFP.
“It has also brought into question the relevance of the Opec cartel, if the most powerful voice in the group cannot affect change.”
The long-running oil glut sparked a vicious collapse from above $100 in mid-2014 to 13-year lows of around $27 in February.
Kingpin Saudi Arabia insisted it would not agree to freeze production without the participation of fellow cartel member Iran — which boycotted the talks.
“The much-awaited meeting exposed the political rift between Saudi Arabia and Iran, and (this) ultimately doomed the agreement,” said Barclays oil analyst Miswin Mahesh in a research note.
“Though Iran initially planned to send their Opec minister, his participation was cancelled when the Qataris insisted that all attendees would also be signatories to any deal.
“The political tension between Saudi Arabia and Iran trumped the economics for agreeing to a deal.”
In both June and December last year, the Organisation of the Petroleum Exporting Countries — which pumps about 40 per cent of the world’s oil — refused to cut output.
Published in Dawn, April 19th, 2016
