Oil prices slump 2% despite Saudi-Russian pledge to cut inventories

Oil prices declined 2 percent on Wednesday as oversupply concerns continued to weigh on investor sentiment, despite top producers Saudi Arabia and Russia pledging to continue efforts to stabilize the crude market.

Global benchmark Brent crude was last down 2.3 percent at $50.64 per barrel (bbl), while West Texas Intermediate fell 1.9 percent to $48.71/bbl.

The oil price slide came despite comments from top Saudi and Russian officials that both countries would continue to cooperate to improve prices.

“There are no contradictions between Riyadh and Moscow in the oil market; our coordinated activities make it possible to stabilize the situation on global hydrocarbon markets,” said Saudi Deputy Crown Prince and Defense Minister Mohammed bin Salman, who is on an official visit to Moscow.

Saudi energy minister Khalid Al-Falih also said on Wednesday that OPEC and non-members remain committed to cut global oil inventories to a five-year average, Reuters reported.

Last week, the cartel and other oil producers, including Russia, decided to extend their output cut agreement by another nine months, starting July 1.

OPEC had agreed in December with other oil producers to jointly cut production by 1.8 million barrels per day (bpd), starting Jan. 1, 2017, in a bid to reduce the glut in the market and boost oil prices.

However, some members like Libya and Nigeria, and other producers like the US, are not part of the deal, raising the possibility of increased output from these countries.

Moreover, skepticism remains over the effectiveness of OPEC’s output cuts, further weighing on oil prices, Germany-based Commerzbank said in a note on Wednesday.

“Prices are likely to remain weak until there is any noticeable reduction in oil stocks,” the lender added.

Write to Jerusha Sequeira at jerusha.s@argaamnews.com