Oil prices slid for a second straight day Tuesday, amid fresh concerns of a global oversupply that has dampened hopes for a continued rally that last week saw Brent crude reach its highest price of the year.
Major oil producers like Saudi Arabia, Russia, Qatar and Venezuela have proposed freezing their output to January levels, but the global excess is still at least one million barrels per day.
Just one week earlier, Brent crude reached its highest price of the year, exceeding $40 a barrel and raising hopes that the global outlook would improve with a decreased supply. But prices so far this week suggest that the rally could be coming to an end.
"We ran into $40 a barrel... the idea OPEC was going to be able to at least freeze production and was along the right tracks has unraveled a bit," Jasper Lawler, a CMC Markets strategist, told Reuters.
Iranian oil ministers had said over the weekend that Iraq would discuss with other oil producers the possibility of freezing output, but only at 4 million barrels a day. It currently produces about 3.1 million daily, up from 2.9 million barrels per day in January. Saudi and Russian production have been stable.
For the past month, demand for oil appeared to be surging and supply decreasing, but not strongly enough to transform a market with a longstanding oversupply. Investors reacted bullishly nonetheless, driving up prices by 20 percent in the two months through the first week of March.
“We’ve had record high speculative positions in Brent crude and now we’re losing some of the supportive elements,” said Bjarne Schieldrop, chief commodity analyst at SEB Markets, in a report in the Wall Street Journal.