LONDON — Oil turned negative on Tuesday as a speech by Russian President Vladimir Putin made no mention of any producer-coordinated output cuts, returning bearish sentiment to the market after prices had touched a two-month high.
Benchmark Brent crude futures were down 56c at $36.01 a barrel at 2.51pm GMT, erasing most gains made earlier in the session, when the contract reached a peak of $37.06.
US crude futures were trading at $33.50 a barrel, 25 cents below Monday’s close.
"People are hooked to the comments from key oil producers," said Abhishek Deshpande, chief oil analyst at investment bank Natixis.
"The slightest comment that suggests a solution to tackling overproduction or does not suggest any action seems to move the market right now," Mr Deshpande said.
Mr Putin said Russian oil companies had agreed not to raise oil production this year.
He added it was Moscow’s task to ensure stability in the Russian oil industry and that weak oil prices had been a result of a global economic slowdown and speculative deals.
Discussions among major oil producers, including Saudi Arabia and Russia, agreeing to a production freeze are unlikely to reduce a global overhang in supply of well over 1-million barrels per day (bpd), analysts said.
A surprise monetary easing by China had propped up prices earlier in the session, stoking expectations for higher oil demand from the world’s largest commodities consumer.
A cut in the amount of cash that banks must hold as reserves frees up an estimated $100bn for fresh lending.
Signs that a global supply glut is easing are beginning to emerge.
Exports from Iraq’s southern fields dropped in February to an average of 3.225-million bpd, the country’s oil ministry said.
This fed into a Reuters survey showing Organisation of Petroleum Exporting Countries (Opec) production had slipped from the highest monthly level in recent history. Opec supply fell to 32.37 million bpd in February, the survey showed.
The International Energy Agency’s oil division head, Neil Atkinson, said on Tuesday oil prices had "bottomed out" and were set to rise throughout this year and next.
He said a price rally would be limited in the medium term by US shale production costs of $40 to $50 a barrel, however.