Oil renews slide as production cuts prove elusive

Oil prices fell on both sides of the Atlantic on Tuesday, with US crude dipping below $30 a barrel, as a deal between OPEC and Russia on cutting production remained elusive.

Brent, the global oil benchmark, dropped $1.85 a barrel to $32.35 for delivery in April, while West Texas, the US equivalent, fell $1.73 to $29.90 as Venezuela attempted to drum up support for co-ordinated output cuts to bolster prices that touched a 12-year low earlier this month.

The country’s oil minister Eulogio del Pino is on a whistle-stop tour of big producer countries this week, starting in Russia, where he met energy minister Alexander Novak on Monday and the chairman of Rosneft, Igor Sechin, on Tuesday.

Mr del Pino, who also heads Venezuela’s state-owned oil company PDVSA, is due to visit Qatar, Iran and Saudi Arabia later this week.

So far, however, his push for an emergency meeting of Opec and non-Opec producers has been met with a lukewarm response.

While senior Russian ministers have said Moscow is receptive to co-operation in the oil market , they, along with some industry executives, are still unsure about the merits of a production cut.

Strategic concerns and anxieties about losing market share to Opec rivals are at the forefront of their minds, according to a person familiar with the matter.

Mr Sechin has been one of the most vocal opponents of production cuts during the past year, saying it is difficult for Russian companies to reduce output because of harsh winter weather and obligations to shareholders.

“Igor Sechin and Eulogio del Pino discussed possible co-operation with the ambit of normalisation of the situation in the world oil market,” the Kremlin-backed Rosneft said in a statement after their meeting on Tuesday.

Saudi Arabia, Opec’s largest producer and de facto leader, has said it will consider cutting output but only if other members of the cartel and Russia co-operate.

Few countries within the cartel think Russia will genuinely commit to cuts.

Some members are also reluctant to hold an emergency meeting without reaching a unified position ahead of time, believing it would do more harm than good to the oil price.

At the same time, Gulf countries were seeking more clarity on Iran’s post-sanctions production and export output before reaching any agreement, one senior delegate said. Iran is demanding the right to produce as much as it can to make up for years of lower production because of US-led sanctions.

If these obstacles can be overcome and there is a deal to cut output, quotas would need to be implemented and enforced both inside and outside Opec, which would be a harder task, say analysts.

“Even if it was to happen, it would have to be seen to be enacted, which is another leap of faith on the part of oil bulls,” said Seth Kleiman, analyst at Citi.

However, the pain inflicted by lower prices means a deal cannot be ruled out. This is one reason why hedge funds are increasingly divided about the next move for oil, which has rebounded sharply after hitting a 12-year low last week.

Funds that had helped build a near-record bet against oil at the beginning of the year cut their bearish Brent positions by a quarter last week.

“We expect 2016 to be a tough year,” said Bob Dudley, chief executive of BP. The oil major tumbled to a $2.2bn fourth-quarter loss after it took heavy write-down and restructuring charges following the more than 70 per cent plunge in crude prices during the past 18 months.

ExxonMobil also reported its smallest quarterly profit in more than a decade. It said it would make a steep cut in capital spending this year as it sought to cope with a prolonged price downturn.