Oil extended its decline in Asia on Tuesday as hopes that major crude producers will freeze output to ease a world surplus faded, sending Brent crude back below $40.
A meeting proposed by Russia and Saudi Arabia to discuss output limits has been pushed back to April from March 20, after signs some key producing nations do not support the move.
Iran has said it would not join the effort until its own crude production reached pre-sanction levels of 4.0 million barrels per day, about double its current output.
At about 0900 IST, US benchmark West Texas Intermediate (WTI) for delivery in April was down 23 cents to $36.95 and Brent for May was down 29 cents to $39.24 a barrel.
WTI slumped 3.4 per cent and Brent eased 2.1 per cent on Monday, giving up gains that saw the global benchmark break $40 a barrel for the first time this year last week.
"I remain sceptical on any such supply talks as the probability of any definitive action is unlikely to be high," said Bernard Aw, market strategist at IG Markets Singapore.
Even if the talks happen, the meeting’s agenda is freezing production – a stop gap measure – rather than the more long- term goal of cutting output to reduce the global crude oversupply, Aw noted.
"What I fear is that any breakdowns in the proposed talks, if there even is a meeting, will drag oil prices through the mud again," he said.
The talks were supposed to be held in Russia this month, but are now set to happen next month in Doha, Qatar.
Singapore trade minister S Iswaran told a gas conference on Tuesday that crude prices are likely to remain $30-50 per barrel this year due to oversupply, a slowing Chinese economy and Japan restarting nuclear power plants.
Traders are also watching for US economic data and meeting of Federal Reserve policy makers starting on Tuesday for clues on whether they will announce another interest rate hike.
A rate increase is a boost to the dollar, which would make dollar-priced oil more expensive, hurting demand and prices.
The Fed raised rates for the first time in nearly a decade in December.