Oil prices have slumped, pulling back from last week’s gains after Saudi Arabia and Russia delayed a meeting of oil producers aimed at resolving growing worldwide oversupply as the coronavirus pandemic pummels demand.

The global oil market rebounded over 35 per cent last week after sources at the Organisation of the Petroleum Exporting Countries and its allies, including Russia, said they are close to a deal on oil output cuts to reduce a global glut, though they want participation from the United States and others.

However, the meeting of the OPEC+ group, originally scheduled for Monday, has been delayed to Thursday as sniping between Russia and Saudi Arabia over last month’s collapse of an existing supply-cut agreement continued. Fuel demand is down by roughly 30 per cent worldwide due to the coronavirus while those nations are flooding markets with unneeded supply.

“The delay in the OPEC+ meeting sparked much of today’s selloff as a result of major philosophical differences between Russia and the Saudis that will likely preclude a deal on Thursday,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

On Monday, Kirill Dmitriev, one of Moscow’s primary oil negotiators, said that Russia and the Saudis were close to a deal to cut output.

Brent futures settled $US1.06, or 3.1 per cent, lower at $US33.05 a barrel, while US West Texas Intermediate crude fell $US2.26, or 8.0 per cent, to end at $US26.08.

US prices fell more than global benchmark Brent after a report from data provider Genscape showed that inventories at the Cushing storage hub in Oklahoma, the delivery point for WTI, rose by about 5.8 million barrels last week, traders said.

If those figures are matched by official US Energy Information Administration data on Wednesday, it would be the fifth straight weekly storage build at the hub and the biggest weekly increase on record dating to 2004.

“Global storage tanks will continue to get filled and once storage capacity is reached, oil prices could enter free fall,” said Edward Moya, senior market analyst at OANDA in New York. “OPEC+ might have a couple months before global storage capacity is reached, so production cuts will have to happen no matter what.”

OPEC+ is working on a deal to cut production by about 10 per cent of world supply, or 10 million barrels per day, but members states want that to be a global effort, one that would pull in nations that do not normally restrict supply of private oil companies, particularly world production leader the United States.

Rystad Energy’s head of oil markets Bjornar Tonhaugen said even if the group agrees to cut up to 15 million bpd, “it will only be enough to scratch the surface of the more than 23 million bpd supply overhang predicted for April 2020.”

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