Just as predicted, the market punished oil producers on Monday after they failed to reach an agreement on capping output aimed at easing a global supply glut during a meeting in Doha.
Oil prices plunged in trading in Asia and the forecast for the next few days, may see prices sliding to the $30 range. Prices dropped as much as seven percent in opening deals and later settled to about 5 per cent fall.
And that is still bad news for cash strapped nations such as Nigeria and Angola.
Hopes the world’s main producer cartel, OPEC, and other major exporters like Russia would agree to freeze output has helped scrape oil prices off the 13-year lows they touched in February.
But crude tanked after top producer Saudi Arabia walked away from the talks, which many hoped would ease a huge surplus in world supplies, because of a boycott by its rival Iran.
At around 0100 GMT, US benchmark West Texas Intermediate for May delivery was down $2.11, or 5.23 percent, from Friday’s close at $38.25 a barrel.
Global benchmark Brent crude for June lost 4.71 percent, or $2.03, to $41.07.
“Despite many of the 18 oil producers believing the meeting in Doha was merely a rubber stamp affair for an oil production freeze, Saudi Arabia managed to throw a spanner in the works,” said Angus Nicholson, an analyst at IG Markets.
“With Saudi Arabia fighting proxy wars with Iran in Yemen and Syria/Iraq, it is understandable that they had little inclination to freeze their own production and make way for newly sanctions-free Iran to increase their market share.”
Members of the Organization of the Petroleum Exporting Countries (OPEC) and other big producers have been seeking to ease a slump in oil prices that has cost them billions of dollars in lost revenue.
Major exporters around the world, from Nigeria to Venezuela and even kingpin Saudi Arabia, have suffered as prices have slumped to less than half their peak in mid-2014.
But Iran, which only recently returned to world oil markets after the lifting of Western sanctions in January, has ruled out capping its own production as it seeks to regain market share.