Crude tumbles below $30 as hopes for OPEC production cut fade

Oil dropped below $30 a barrel in New York on Monday as equities tumbled and no agreement emerged from Venezuela’s tour of crude-producing nations.

West Texas Intermediate for March delivery fell $1.20 to $29.69 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 21. Brent for April settlement dropped $1.18, or 3.5 percent, to $32.88 a barrel on the London-based ICE Futures Europe exchange.

No steps to shore up the market were announced after Saudi Arabian Oil Minister Ali al-Naimi met his Venezuelan counterpart Sunday in Riyadh. Oil is down 19 percent this year as Iran boosts exports after the removal of sanctions and U.S. crude supplies swell.

Prices could remain below $60 a barrel for as long as 10 years as Chinese economic growth slows and the American shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group, the world’s largest independent oil trader.

“The reality is seeping back in that there isn’t going to be any production cutback outside of the U.S.,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “There has to be some change in the oversupply picture and we aren’t getting that. There was another big increase in U.S. inventories last week and the Venezuelan oil minister didn’t come out of the meeting in Riyadh announcing an agreement to cut.”

Venezuela’s Oil Minister Eulogio Del Pino met al-Naimi after visiting Russia, Iran, Qatar and Oman on a tour to drum up support for a coordinated approach to stem the slide in prices. Six members of the Organization of Petroleum Exporting Countries and two non-OPEC producers would be open to attending an extraordinary meeting if one is called, the South American country said last week.

“Venezuela’s quest to broker talks between OPEC and non-OPEC was doomed from the very beginning,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. “It just showed how desperate some of the oil-producing countries are now.”

U.S. stockpiles climbed above 500 million barrels to the highest level since 1930 in the week ended Jan. 29, according to data compiled by the Energy Information Administration. Supplies probably rose by 3.2 million barrels last week, according to a Bloomberg survey before an EIA report Wednesday.

“It’s hard to see a dramatic price increase,” Vitol’s Taylor told Bloomberg in an interview. Oil is likely to bounce between $40 a barrel and $60 for the next decade, with a midpoint of $50, he said.

This story was originally published February 8, 2016 at 4:57 PM with the headline "Crude tumbles below $30 as hopes for OPEC production cut fade."