Rally in crude oil prices collapses after Iran said it won't back a cap on production until it increases its output to a certain level. Brent moves back below $40 per barrel to start trading Monday. File photo by Monika Graff/UPI | License Photo
NEW YORK, March 14 (UPI) -- Caveats to a proposed freeze in oil production from Iran pushed crude oil prices sharply lower, moving Brent to below $40 per barrel after last week's rally.
An expected downturn in U.S. crude oil production through 2016 helped push crude oil prices higher last week, sending Brent above $40 per barrel for the first time this year. Oil prices have been under pressure because soft global economic recovery wasn't enough to take on soaring inventories, tilting the market balance heavily toward the supply side.
Iranian Oil Minister Bijan Zangeneh said his country would consider a cap on production levels once his country regained a stronger position in the post-sanctions era. Rival producers like Saudi Arabia have called for a freeze to January production levels in order to stabilize the markets.
"I have already announced my view regarding the oil freeze and I'm saying now that as long as we have not reached 4 million [barrels per day] in production, they should leave us alone," he was quoted by Iranian broadcaster Press TV as saying.
The U.S. Energy Information Administration said in January, when sanctions pressure started to ease for Iran, that production should average about 3.1 million bpd this year and grow to almost 3.6 million bpd by 2017.
The minister's statement erased much of last week's momentum. Brent crude oil lost 2.8 percent at the start of trading in New York to open at $39.26 per barrel. West Texas Intermediate, the U.S. benchmark price for crude oil, lost about 2.9 percent to start the day at $37.39 per barrel.
Russian Energy Minister Alexander Novak arrived Monday in Tehran to review production levels. Novak met last month with his counterparts from Qatar, Saudi Arabia and Venezuela to consider market proposals.
Zangeneh in February said any calls on Iran to scale back production at a time when sanctions pressures are easing are "a joke."