SINGAPORE/LONDON: Oil prices tumbled 5 percent early on Monday after a meeting by major producers in Qatar fell apart the day before, leaving the world awash with unwanted fuel.
International benchmark Brent crude futures were trading at $40.86 per barrel at 0029 GMT, down 5.2 percent since their last settlement.
US crude futures were down 5.7 percent at $38.06 a barrel.
Some 18 oil exporting nations, including non-OPEC Russia, had gathered in the Qatari capital of Doha for what was expected to be the rubber-stamping of a deal to stabilise output at January levels until October 2016.
But the deal fell apart after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.
“The failure is negative from the psychological point of view. It shows the inability of all sides to cooperate,” said Gary Ross, the founder and executive chairman at New York-based consultancy PIRA.
The development will revive industry fears that major producers are embarking again on a battle for market share in a world already awash with unwanted oil, especially after Riyadh threatened to raise output steeply if no freeze deal were reached.
As a result Brent would likely average $36 per barrel during the second quarter of this year as a global glut continued unabated, it said.
“This meeting and its outcome should have built confidence that the oil market rebalancing was close at hand, as well as building a circle of trust among producers for possible future cooperation and coordinated action. In this regard, the meeting was a complete failure,” Barclays added.
“The failure of the talks gives the market another clear indication (similar to the failed December 2015 OPEC meeting) that OPEC’s relevance in this market environment has faded, and its ability to coordinate with members outside the group is equally difficult.”
Oil prices have fallen by as much as 70 percent since mid-2014 as producers have pumped 1 to 2 million barrels of crude every day in excess of demand, leaving storage tanks around the world filled to the rims with unsold fuel.
Beyond the failed deal, however, there were signs of a tightening market due to an oil worker strike in Kuwait which may have cut its production from 2.85 million barrels per day (bpd) to just 1.1 million bpd.
In the United States, oil services company Baker Hughes Inc said on Friday that drillers had cut their rigs to fresh 2009 lows as the industry suffers from low prices.