Oil sinks for second day on fading hopes of output deal, weather

Tue Feb 2, 2016 5:06pm EST
 
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By Devika Krishna Kumar

NEW YORK (Reuters) - Oil slumped for the second straight day, with U.S. crude ending 5.5 percent lower on Tuesday, as hopes of a deal to curb one of the worst supply gluts in history continued to fade amid concerns that mild winter weather in the U.S. will dampen demand.

The oil markets erased most of last week's four-day rally, when it soared almost 20 percent from the lows touched in mid-January, after Russia's Energy Minister said OPEC kingpin Saudi Arabia suggested a production cut.

Hopes dimmed this week as no deal has emerged and talks between Russia's energy minister and Venezuela's oil minister on Monday failed to result in any clear plan to reduce output.

U.S. investment bank Goldman Sachs said it was "highly unlikely" the Organization of the Petroleum Exporting Countries would cooperate with Russia to cut output, saying the move would also be self-defeating as stronger prices would bring previously shelved production back to the market.

"As they (producers) continue to disappoint, we're going to trade lower, until the market forces them to do something and I think that's at a much lower price than here," said analyst John Kilduff, partner at Again Capital LLC in New York.

Brent crude LCOc1 closed down $1.52, or 4.4 percent, at $32.72 a barrel. It fell as much as 5.9 percent to $32.23 in the session.

U.S. West Texas Intermediate crude (WTI) CLc1 settled 5.5 percent, or $1.74 lower at $29.88 per barrel, after falling as low as $29.81.

The contract fell further in post-settlement trade to $29.57 after data from the American Petroleum Institute, an industry group, showed 3.8 million-barrel build in U.S. crude stocks last week.   Continued...

 
Pump jacks are seen at the Lukoil company owned Imilorskoye oil field outside the West Siberian city of Kogalym, Russia, January 25, 2016.  REUTERS/Sergei Karpukhin