Oil tumbled after the Organisation of Petroleum Exporting Countries (Opec) failed to agree a production ceiling at a widely watched meeting in Vienna today.
Brent crude, the international benchmark, plunged 1.3 per cent to $49.1 per barrel. It had climbed above the $50 mark this morning, hitting its highest level in a week. West Texas Intermediate crude, the US benchmark, tumbled 1.8 per cent to $48.2.
De facto Opec leader, Saudi Arabia, had promised not to flood the already oversupplied oil markets. "We will be very gentle in our approach and make sure we don't shock the market in any way," its new energy minister, Khalid al-Falih told reporters.
"It is bearish short-term for oil prices. But what is also important is that Saudis are not planning to flood the market," Gary Ross, founder of US-based PIRA consultancy, said.
Opec also unanimously appointed Nigeria's Mohammed Barkindo as its new secretary-general, a rare agreement for the fractured group.
Saudi Arabia had wanted to co-ordinate action or agree a formal output target, but Iran refused to co-operate. However, it was still less tense than previous gatherings, particularly the disastrous December meeting.
It also marked the first meeting since Opec's relevance was called into question after the cartel and non-Opec members failed to freeze production in April.
While there had been some speculation about a potential quota or freeze, the majority of analysts were expecting for no change.
"The best outcome they can hope for is a meeting that passes without too much evidence of disagreement," Richard Mallinson, geopolitical risk analyst at Energy Aspects, told City A.M ahead of the meeting.
"We don't think any substantive agreement is going to emerge from the talks… we see little appetite among the key countries to have another go at overcoming the differences and divisions within the group," he added.
Oil prices have recovered from a multi-year low of below $28 per barrel in January, to touch $50 recently, due to supply outages in countries like Canada and Nigeria.