Crude futures plunged more than 4%, closing near session-lows, as energy traders reacted to reports that Saudi Arabia will only freeze production at a closely-watched meeting this month if Iran decides to cap output as well.
On the New York Mercantile Exchange, WTI crude for May delivery traded in a broad range between $36.73 and $38.48 a barrel, before settling at $36.79, down 1.55 or 4.04% on the session. At session lows, U.S. crude futures fell to its lowest level since mid-March, dropping below $37 a barrel for the first time since March 16. WTI crude is coming off its strongest month in nearly a year when it surged more than 13%, amid strong indications that Saudi Arabia, Russia and two other OPEC producers will freeze output at their respective January levels when the nations meet at an April 17 summit in Doha.
On the Intercontinental Exchange (ICE), brent crude for June delivery wavered between $38.56 and $40.43, before closing at $38.68, down 1.63 or 4.04% on the trading day. North Brent Sea futures slipped under $39 a barrel for the first time in more than two weeks.
Both the international and U.S. domestic benchmarks of crude are up considerably since touching down to fresh multi-year lows in early-February.
Crude futures fell sharply on Friday after Mohammed Bin Salman, Saudi's deputy crown prince stubbornly insisted that the kingdom will resist any agreement to cap its output unless the pact is also signed by their Iranian rivals. While Iran has agreed to attend the OPEC-Non OPEC later this month in Qatar, Iranian officials are hesitant to limit production until it returns to pre-sanction levels from 2007. A Bloomberg survey released on Thursday found that Iran pumped 3.2 million bpd in March, its highest level since May, 2012.
"If all countries agree to freeze production, we’re ready," Bin Salman said in an exclusive interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door."
Despite the recent rally, crude futures are down more than 40% since November, 2014, when OPEC rattled global energy markets with a strategic decision to maintain its production ceiling above 30 million barrels per day. Last month, a Reuters survey found that OPEC increased production by 100,000 barrels per day in March to 32.47 million bpd. As markets worldwide remain awash in excessive supply, oil prices have fallen sharply below their peak of $115 a barrel from June, 2014.
Separately, oil services firm Baker Hughes said the U.S. oil rig count fell by 10 to 362 this week, falling to its lowest level since November, 2009. The combined oil and gas rig count dropped by 14 to 450, remaining near record lows hit last month. Considerable declines in the number of oil rigs nationwide typically provide lagging indications that production could be on the verge of slowing.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% to an intraday high of 95.10, before falling back to 94.60 in U.S. afternoon trading. The index remains near five-month lows.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
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