Major oil producers failed to reach an agreement to cap production at recent levels.
The North Sea benchmark Brent was down four percent on Monday trading at $41.36 per barrel. West Texas Intermediate crude fell $1.78 and was seen at $38.58 a barrel as of 8:30am GMT.
Analysts believe that in the current market the Saudi government is nervous about ceding market share to other producers. History has shown that in a bearish market, ceding market share makes it difficult to regain that share when oil prices are high.
The world’s largest oil producers came together in the capital of Qatar on Sunday. Instead of agreeing to cap oil prices at January levels, the potential agreement fell apart when Saudi Arabia stated that they and other producers stated that oil production would not be capped unless all OPEC members joined in, including Iran.
Iran has refused to participate in any oil cap agreement, and was not present at the meeting in Doha over the weekend. Iranian oil is flooding the market, threatening to bring oil price levels tumbling and sinking the market into an even greater glut. Iran has refused to participate in talks as the country seeks to sell oil stocks and improve its economy, which has been struggling since international sanctions were levied against Iran.
There are deep uncertainties about the oil market, with analysts predicting that prices could fall below $30 a barrel for brent. The market will need to find a balance if oil prices are to approach sustainable levels.