Investing.com -- Crude futures fell sharply on Tuesday, erasing most of their gains from the previous session's rally, as bearish comments from officials in Saudi Arabia and Iran provided few signals of any forthcoming reductions in the massive global supply glut in the near-term future.
On the New York Mercantile Exchange, WTI crude for April delivery wavered between $31.66 and $33.52 a barrel before settling at $31.81, down 1.58 or 4.73% on the day. Crude prices retreated on Tuesday, one day after surging more than $1.40 a barrel to reach its highest levels in nearly three weeks. Despite the considerable sell-off, U.S. crude futures are still up more than 16% since falling to 13-year lows at $26.05 on February 11.
On the Intercontinental Exchange, brent crude for April delivery traded between $33.10 and $35.09 a barrel, before closing at $33.24, down 1.43 or 4.18% on the session. North Brent Sea futures have still rallied by approximately 9% since dropping below $30 a barrel in mid-February.
Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $1.43, above Monday's level of $1.30 at the close of trading.
Speaking before an audience at the CERAWeek 2016 Energy conference in Houston, Saudi Arabia oil minister Ali al-Naimi reiterated on Tuesday morning that the kingdom will not lower production from its current levels, resisting calls to slash output in an effort to rescue prices. In effect, al-Naimi did not deviate from Saudi Arabia's policy shift adopted in November, 2014, when the major producer abandoned a strategy of defending prices in favor of boosting market share. Crude prices have tumbled more than 60% since the meeting, pushing a number of top energy companies to near bankruptcy and creating massive budget deficits among a host of oil-reliant nations.
Last week, Saudi Arabia agreed in principle with Russia and two other OPEC members to freeze production at its January level. Saudi Arabia, the world's top exporter, pumped approximately 10.2 million barrels per day in January, down slightly from June's record-high of 10.5 million bpd.
“A freeze is the beginning of a process. If we can get all the major producers to agree not to add additional barrels then this high inventory we have now will probably decline in due time,” Al-Naimi said at the morning address. "“This is not the same as cutting production. That’s not going to happen.”
Al-Naimi's comments came hours after Iran counterpart Bijan Zanganeh ridiculed the pact, calling the plan "ridiculous," according to Iran news agency Shana. The deal is contingent on receiving approval from Iran, which has been hesitant to cap output weeks after a group of Western Powers eased long-term economic sanctions against the Persian Gulf nation several weeks ago. Following last month's Implementation Day announcement, Iran is expected to ramp up its production and exports by as much as 1 million bpd over the next year.
Zaganeh, who is willing to freeze output when it returns to pre-sanction levels from 2007, said Tuesday that the proposal places "unrealistic demands," on his country.
Elsewhere, energy traders will keep a close eye on the American Petroleum Institute's weekly crude inventory report on Tuesday afternoon after the bell, as storage facilities nationwide continue to near full capacity. Separately, Wednesday's government report could show that crude inventories rose by 3.2 million barrels for the week ending on Feb. 19.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% to an intraday high of 97.58. Since reaching 12-month highs in late-November, the index has dropped roughly 2%.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.