Oil prices crash after Saudis fail to broker global production cut
Global oil powers cannot agree on a production cut and will freeze output at its highest ever levels instead, sending prices plunging 3pc.
The world's two most powerful oil producers have reached a tentative agreement to freeze oil production at their current levels, dashing hopes of a supply cut for the world's glutted market.
Meeting in Doha, Russia, Venezuelan, Qatari and Saudi Arabian oil ministers reached a deal to halt production at January levels, but only if it was followed suit by other producers such as Iran and Iraq.
Forward prices for Bent crude plunged by as much as 3pc on the news to $33.68 a barrel, reversing days of gains.
The decision comes after months of speculation of a brewing entente between Riyadh and Moscow to limit output and help stabilize prices.
Oil had rallied sharply in anticipation of the meeting, and the prospect of a paring back of supply led by Opec's de facto leader and its biggest non-cartel rival.
But announcement did nothing to bouy traders as it indicated that the world's oil giants would continue to pump at record levels that has seen the supply glut hit more than a million barrels a day.
Russian production hit an all-time post-Soviet era high of 10.88 million barrels a day in January.
Speaking in Doha, Saudi's powerful oil minister Ali al-Naimi said: "This is the beginning of a process which we will assess in the next few months and decide whether we need other steps to stabilise and approve the market."
Iranian sources told Reuters the Islamic Republic would only consider freezing production once its production levels had hit pre-sanction levels, of more than 500,000 barrels a day.
Ahead of today's decision, analysts at Energy Aspects said the Saudis failure to broker a deal with its rivals would damage the kingdom's "credibility".
"Saudi Arabia will not act unilaterally and key actors, namely Iran, Iraq, and Russia, must join any potential cut", they wrote.
"If those conditions are not met, Saudi Arabia may still decide to cut when it can influence the market again".
Rising geopolitical tension between Riyadh and Russia have also dampened hopes of a diplomatic deal. Saudi Arabia's crown prince Muhammad bin Salman is now due to visit Moscow in March.
Although a production freeze could well be a precursor to a full blown production cut, analysts said would do little to help balance the world's over-supplied markets and instead pointed to Saudi Arabia's wider impotence in influencing oil prices.