Crude oil prices have taken a hit from the failure of oil-rich countries to reach an agreement Sunday on freezing production.
U.S. crude oil fell $2.20 to $38.16 a barrel in electronic trading on the New York Mercantile Exchange, down 5.5 percent early Monday in Asia. It sank to a low of $37.61 a barrel, down 6.8 percent before regaining some of that loss.
Brent crude oil, which is used to price international crude oil, fell $2.23 to $40.87 a barrel early Monday, down 5.1 percent. It tumbled 7 percent in earlier trading.
The effort to reach an accord on freezing production to support prices failed after Iran stayed away from a weekend meeting of 18 oil producing nations in Qatar that had been expected to boost crude prices.
“The market basically rallied from $26.05 to levels above $40 on the ‘hope’ that there would be some kind of agreement at Doha. That did not happen,” said Robert Yawger, director of energy futures at Mizuho Securities USA.
Since U.S. crude oil supplies are at all-time highs, Iran is increasing output and Libya is due to step up production, so “prices will trade lower. Maybe sharply lower,” he said.
Oil prices hit a 12-year low in January, dipping under $30 a barrel, but had risen above $40 in recent days, buoyed by bullish talks surrounding the Doha meeting.