Brent crude LCoc1 slipped close to $30 a barrel earlier but pared losses to trade down 24 cents, or 0.7%, to $33.87 a barrel by 0639 GMT. West Texas Intermediate crude CLc1 fell 41 cents, or 1.5%, to $27.93 a barrel, off a session low of $25.28.
Late last week, prices surged, with U.S. and Brent contracts posting their largest ever weekly percentage gains due to hopes that OPEC and its allies would strike a deal to cut crude supply worldwide by at least 10 million barrels per day (bpd).
Saudi Arabia and Russia were initially set to meet on Monday to discuss output cuts, but that has now been pushed to April 9, after they blamed each other for the collapse of talks in March.
The countries are “very, very close” to a deal on cuts, Russia’s sovereign wealth fund chief told CNBC.
U.S. President Donald Trump has said he will impose tariffs on crude imports if he needed to “protect” U.S. energy workers from the oil price crash that has been exacerbated by the war between Russia and Saudi Arabia over market share.
Prices on both sides of the Atlantic marked their worst month on record in March as the coronavirus pandemic crippled demand in a market flooded with supplies.
Production cuts could come “too little, too late” to support oil prices, ANZ and Citi analysts cautioned.
The head of the International Energy Agency has said oil inventories would still rise by 15 million bpd in the second quarter even with output cuts of 10 million bpd.
He urged the world’s richest economies to discuss broader ways to stabilise oil markets.
Still, a move by Saudi Arabia to delay the release of its crude official selling prices indicates it is not eager to flood the market with cheap supplies before a potential agreement, said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.
“That’s a pretty clear sign that they are open to cutting production in May,” he said.
The kingdom delayed the release until Friday to wait for the outcome of the meeting between OPEC and its allies regarding possible output cuts, a Saudi source told Reuters.
Indicating the market too is expecting the supply glut to improve, prompt oil prices jumped last week and sharply narrowed their gap with future months LCOc1-LCOc6.
Decades-low prices have already forced producers to cut output, analysts said.
“In the short term the low prices are very painful, but if it does lead to a lot of those players leaving the industry, the supply side of the equation will balance out,” Michael McCarthy, chief strategist at CMC Global Markets in Sydney, said, referring to U.S. shale producers.
Rig counts in the United States fell by 62 last week, energy services firm Baker Hughes Co BRK.N said on Friday, marking the biggest weekly drop in five years, as U.S. energy companies slashed spending on new drilling due to a coronavirus-related slump in economic activity and fuel demand.
Citi analysts expects the drop in onshore U.S. rigs to accelerate, falling by 425 to 360 rigs by the fourth quarter.
Brazil’s Petrobras has also doubled its oil output cuts to 200,000 bpd, or 6% of its total production.