Oil prices are back in red as Iran has once again poured cold water on the expectations of coordinating on an output freeze with other producers. This has again disrupted bullish sentiment on the commodity, sending Brent crude prices back below $40 per barrel.
Iran dumps oil output cut plans
During early European trade, Brent crude fell 1.49% to $39.79 while West Texas Intermediate slipped 1.71% to $37.84. Tamas Varga, an oil analyst at PVM Oil Associates, said that Iran has dashed oil rebound hopes by stating that it will cooperate with a production cut only after it crosses output of 4 million barrels per day.
Currently, the region’s oil exports are hovering near 2 million barrels per day and is expected to touch the 4 million mark by March 19. Iran’s oil minister, Bijan Zanganeh, has extinguished expectations that it will join the production cut anytime soon. Zanganeh is due to meet his Russian counterpart, Alexander Novak today in Tehran.
Saudi Arabia sticks to the plan
Meanwhile, Saudi Arabia holds on to its commitment to keeping production output maintained at January levels. The region’s crude production did not change in February and maintained at 10.22 million barrels per day. At the same time, a report from Morgan Stanley (NYSE:MS) sparked concerns as it said that the rally in oil prices will not continue given the weak demand fundamentals and slowdown in the global economy.
The U.S. bank added that oil prices have reached a bottom but will stay subdued for the remaining part of the year. The bank projects a sustainable rebound in oil prices to come only in 2017. It added that the dip in oil prices will not drive oil-dependent economies as expected earlier. Any fall in oil prices below the production costs leads to only marginal income gains for consumers and increased costs of oil producers substantially, which is undesirable for any economy, summed Morgan Stanley.