NEW YORK: Oil prices slumped on Tuesday (Feb 23) after OPEC kingpin Saudi Arabia's oil minister reaffirmed opposition to a production cut to address global oversupply, expressing hope only for an output freeze next month.
US benchmark West Texas Intermediate for delivery in April tumbled US$1.52 (4.6 per cent) to US$31.87 a barrel on the contract's first day of trade on the New York Mercantile Exchange.
In London, Brent North Sea crude for April, the European benchmark for crude oil, finished the session at US$33.27 a barrel, down US$1.42 (4.1 per cent) from Monday's settlement.
Matt Smith of ClipperData said the market rallied too much on Monday on a report from the International Energy Agency "that was just less bearish than expected and nothing more than that."
"And today we're selling off far stronger than we really should after (Saudi Oil Minister Ali) Al-Naimi has a similar tone that we've heard from him over the past year."
Naimi, speaking at a Houston energy conference, said freezing output was more realistic than cutting because "not many countries are going to deliver, even if they say they will cut production."
Naimi expressed hope that other producers would join a tentative freeze to January output levels it had agreed with Russia, Qatar and Venezuela last week.
Naimi said that "hopefully sometime in March, there will be another meeting and probably (we'll) gather more agreements on freezing."
But OPEC member Iran, which ramped up production in January in the wake of a nuclear agreement with major powers that lifted sanctions, criticised the idea of a freeze.
"Some neighbouring countries have increased their production over the years to 10 million barrels per day and export this amount, then say let's all freeze our oil production," Iranian Oil Minister Bijan Zanganeh said, according to the ISNA news agency.
"They freeze production at 10 million bpd and we freeze at 1 million bpd. This is a very funny joke."
Traders, meanwhile, were betting the US Department of Energy's weekly petroleum inventories report on Wednesday will show another increase in US crude stockpiles.
According to a poll of analysts by Bloomberg News, commercial crude supplies rose by three million barrels in the week ending Feb 19. In the prior week, they climbed by 2.1 million to a record 504.1 million barrels.