Investing.com - Oil prices fell sharply in North American trade on Monday, pulling back from last week’s three-month highs after Iran dashed hopes that there would be a coordinated production freeze any time soon.
On the ICE Futures Exchange in London, Brent oil for May delivery plunged $1.40, or 3.47%, to trade at $38.99 a barrel by 13:50GMT, or 9:50AM ET, pulling back sharply from a three-month peak of $41.47 hit on March 8.
Brent hit a session low of $38.97 after Iranian Oil Minister Bijan Zanganeh said his country would only join discussions between other producers about a possible freeze after its own output reached pre-sanction levels of nearly four million barrels a day.
OPEC and non-OPEC producers are likely to hold their next meeting on a plan to freeze output levels in a bid to support prices in mid-April in Doha, three OPEC sources said on Monday. An earlier plan was to meet on March 20 in Russia.
London-traded Brent futures rose $1.51, or 4.31%, last week, the third consecutive weekly gain, as continued hopes major oil producers will discuss a potential output freeze lifted prices.
Brent futures are up by roughly 30%, since briefly dropping below $30 a barrel on February 11. Short-covering began in mid-February after Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January levels, provided other oil exporters joined in.
Elsewhere, crude oil for April delivery on the New York Mercantile Exchange tumbled $1.52, or 3.95% to trade at $36.98 a barrel. New York-traded oil futures rallied to a three-month peak of $39.02 on Friday.
Nymex oil futures jumped $2.30, or 7.18%, last week, the fourth straight weekly rise, on signs of slowing U.S. shale production.
Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. decreased by six last week to 386, the 12th straight weekly decline and the lowest level since 2009.
There are now nearly 76% fewer rigs of all kinds from a peak of 1,609 in October 2014. A lower U.S. rig count is usually a bullish sign for oil as it signals potentially lower production in the future.
Since falling to 13-year lows at $26.05 on February 11, U.S. crude futures have rebounded by approximately 35% as a decline in U.S. shale production boosted sentiment and amid the growing view that a 20-month-long market rout is finally coming to an end.
Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by OPEC last year not to cut production in order to defend market share, driving down prices by more than 70% over the past 20 months.
The International Energy Agency provided indications that the prolonged rout in oil may have hit a bottom as low prices were beginning to impact production outside of OPEC.
In a monthly forecast released Friday, the Paris-based IEA said that non-OPEC output would decline by 750,000 barrels per day in 2016, compared to a previous estimate of 600,000 bpd. U.S. production alone would decline by 530,000 bpd this year, it said.
"There are clear signs that market forces are working their magic and higher-cost producers are cutting output," the IEA said.
OPEC will publish its own monthly assessment of oil markets later in the session.
Meanwhile, Brent's premium to the West Texas Intermediate crude contract stood at $2.01 a barrel, compared to a gap of $1.89 by close of trade on Friday.