Crude-oil prices lost steam in early Wednesday trade in Asia on profit-taking, as conflicting expectations for key producers to agree on a production freeze keep the market in a volatile mode. On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK6, -1.97% traded at $41.62 a barrel, down $0.55, or 1.3%, in the Globex electronic session. June Brent crude LCOM6, -1.79% on London's ICE Futures exchange fell $0.55, or 1.3%, to $44.13 a barrel. On Tuesday, oil futures rallied to the highest settlement of the year on speculation that Saudi Arabia and Russia have reached a deal to stabilize production, ahead of a meeting of key oil producers in Doha, Qatar, this weekend. The global oil market has been in the doldrums for nearly two years due to oversupply. Despite the extended collapse in prices, those inside and outside of the Organization of the Petroleum Exporting Countries have been reluctant to scale back production fearing the loss of market share. Low oil prices have led to investment cuts by upstream companies as well as bankruptcy among the smaller players. But production, albeit declining, is still growing at a faster pace than demand. Expectations for the Sunday meeting in Doha are largely mixed. Some market watchers believe holding production at January or February levels would eventually allow time for demand to catch up. As oil prices are viewed as a barometer of global financial health, higher oil prices means a lighter burden on central banks to inject more stimulus measures, said Barnabas Gan, an economist at OCBC, a bank. However, others say a freeze just when key players are pumping at record levels won't provide any meaningful relief. It remains to be seen if an accord can be forged, especially as Iran has already rejected the plan, vowing to ramp up production until it reaches the pre-sanction level of 4 million barrels a day. "In our view the freeze idea was always a relatively transparent attempt to convince Iran to limit its production, rather than boosting output back toward pre-sanctions levels. And this attempt has already failed," said Timothy Evans, a Citi Futures analyst. In the immediate term, investors and traders will be eyeing the weekly U.S. crude production and inventories data for cues. A survey by The Wall Street Journal shows U.S. crude stockpiles likely added 1.8 million barrels last week while gasoline supplies fell. The American Petroleum Institute, an industry group, expects a 6.2-million-barrel increase in crude supplies, a 1.6-million-barrel drop in gasoline stocks and a 530,000-barrel decrease in distillate inventories.. The official figures will be released later Wednesday by the Energy Information Administration which recently said U.S. crude production had slipped from a multi-decade peak of 9.7 million barrels a day in April 15 to 9 million barrels a day last month. While diminishing supply is encouraging, concerns on demand have ensued after the International Monetary Fund cut global growth for 2016 by 0.2 percentage point to 3.2%. "The clash between the structural slowdown in global GDP/trade growth and the positive impact of low pump prices are the major story in global oil demand this year, which we expect to grow by 1.3 million barrels a day, compared to the 1.8 million barrels a day of growth in 2015," said consulting firm FGE in a note. Nymex reformulated gasoline blendstock for May NGK16, +1.00% — the benchmark gasoline contract — fell 17 points to $1.5326 a gallon, while May diesel traded at $1.2765, 6 points higher.
