NEW YORK Oil slumped for the second straight day, with U.S. crude ending 5.5 percent lower on Tuesday, as hopes of a deal to curb one of the worst supply gluts in history continued to fade amid concerns that mild winter weather in the U.S. will dampen demand.
The oil markets erased most of last week's four-day rally, when it soared almost 20 percent from the lows touched in mid-January, after Russia's Energy Minister said OPEC kingpin Saudi Arabia suggested a production cut.
Hopes dimmed this week as no deal has emerged and talks between Russia's energy minister and Venezuela's oil minister on Monday failed to result in any clear plan to reduce output.
"As they (producers) continue to disappoint, we're going to trade lower, until the market forces them to do something and I think that's at a much lower price than here," said analyst John Kilduff, partner at Again Capital LLC in New York.
Brent crude LCOc1 closed down $1.52, or 4.4 percent, at $32.72 a barrel. It fell as much as 5.9 percent to $32.23 in the session.
U.S. West Texas Intermediate crude (WTI) CLc1 settled 5.5 percent, or $1.74 lower at $29.88 per barrel, after falling as low as $29.81.
With forecasters projecting the weather in the United States will moderate during the last eight weeks of the November-March winter heating season, U.S. heating oil futures HOc1 were down 2 percent and gasoline RBc1 7 percent lower.
U.S. investment bank Goldman Sachs said it was "highly unlikely" the Organization of the Petroleum Exporting Countries would cooperate with Russia to cut output, saying the move would also be self-defeating as stronger prices would bring previously shelved production back to the market.
Crude prices are in danger of returning to the $20s unless there was concrete reaction on the supply side, said Thomas Saal, analyst at INTL FC Stone in Miami, Florida.
Economic data due later in the week, including U.S. non-farm payroll, unemployment figures and producer prices from the euro zone, could pressure oil prices further, Again Capital's Kilduff said.
"I think it's in the cards to re-test the lows from mid-January," he said, referring to Brent's low of $27.10 and WTI's $26.19.
Still, Citi called a bottom on prices on Tuesday, saying that even while a deal may not materialize, the current lows will be short lived.
Oil stockpiles, however, were still on the rise, with Russian output hitting a post-Soviet high in January and U.S inventories forecast to have added 4.8 million barrels to record supplies last week.
The American Petroleum Institute will release its data at 4:30 p.m. EST (2130 GMT), ahead of the government's report on Wednesday.
Meanwhile, the prolonged downturn in crude prices has crushed the oil majors' results.
Exxon Mobil Corp (XOM.N), the world's largest publicly traded oil company, reported its smallest quarterly profit in more than a decade and planned to cut 2016 spending by a quarter, while BP (BP.L) announced its biggest annual loss and thousands more job cuts.
(Additional reporting by Simon Falush in London, Keith Wallis in Singapore and Felix Bate in Paris; Editing by Chris Reese and Marguerita Choy)
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Updated Date: Feb 03, 2016 03:45 AM