April 17, the major oil producers are going to take a conversation of freezing the oil production at January’s level. Except Iran and Libya, mainly the Saudi and Russia are likely to come with a solution of this tanked oil situation. The prospect of this meeting lift the oil price from below $30 in February to beyond $40 in recent days. But now the concern from the oversupply kicks the rally away and force the price down again.
Oil prices fell to a two-week low Tuesday on concerns that the global market remains too oversupplied to support prices near $40 a barrel.
Prices have rallied sharply in recent weeks on expectations that major oil producers would agree to freeze production and U.S. oil production would start dropping more quickly due to spending cuts. But some analysts and traders warned that the price gains were unsustainable because the global glut of crude persists, with storage facilities close to full around the world.
Stephen Schork, editor of industry newsletter The Schork Report, closed out a bet that oil prices would fall about three weeks ago as the market rallied. He placed a new bearish bet yesterday.
“The rally has run its course, and I think our next big move is another trip back below $30,” Mr. Schork said.
Hedge funds, pension funds and other money managers closed out more than 100,000 bets that oil prices would fall between Feb. 9 and March 22, according to data from the Commodity Futures Trading Commission and Intercontinental Exchange Inc. But they add fewer bets on rising prices, underscoring an uncertainty that the price gains would continue.
Comments by Kuwait’s acting oil minister that production is set to restart in the Khafji oil field also weighed on prices Tuesday. The 300,000-barrel-a-day field, which is jointly operated by Kuwait Gulf Oil Co. and Saudi Arabia’s Aramco Gulf Operations Co., has been closed since October 2014.
The news calls into question for the meeting. Without the participation of Iran and Libya, any deal to freeze production might not actually shrink the glut of crude on the market, analysts say.
“The market may have topped out for the short term, as participants await any further signs that the production freezing deal will actually get done,” said Dominick Chirichella, analyst at the Energy Management Institute, in a note.
The U.S. jobs report later this week will also give a signal on the state of the U.S. economy. Higher employment can increase demand for petroleum products, especially gasoline, as more consumers drive to work.