Oil Down 3 Percent On Fading Hopes For Output Deal In Algiers

Oil fell 3 percent on Tuesday, wiping out gains from the previous session, as producing countries meeting in Algeria appeared less likely to agree on output cuts that would reduce a global glut and boost crude prices out of a two-year slump.

The energy ministers of Saudi Arabia and Russia were to give a joint briefing later in the day in Algiers where OPEC and other oil producers were holding informal talks on the sidelines of the Sept 26-28 International Energy Forum.

Saudi Energy Minister Khalid al-Falih told reporters the mood was positive and discussions were still on.

“We will consult with everyone else, we will hear the views, we will hear the secretariat of OPEC and also hear from consumers,” he said.

Iranian Oil Minister Bijan Zanganeh sounded less committed, saying “it is not the time for decision-making”.

“We will try to reach agreement for November,” Zanganeh said, referring to the formal meeting of the Organization of the Petroleum Exporting Countries in Vienna on Nov. 30.

Brent crude futures fell $1.55, or 3.2 percent, to $45.80 a barrel by 11:10 a.m. EDT. (1510 GMT).

U.S. West Texas Intermediate (WTI) crude dropped $1.55, or 3.4 percent, to $44.38.

In the previous session, Brent and WTI rose about 3 percent on speculation the Algiers talks might result in a deal.

Oil prices have slid to less than half their 2014 highs, pushing OPEC producers and Russia to seek a market rebalancing that would lift the oil revenues they rely on for their national budgets.

Producers hope to freeze output, which analysts said will still not remove excess barrels. The Algiers talk are OPEC’s second attempt to reach an agreement after failed talks in Doha, Qatar in April.

Analysts said No. 1 crude exporter Saudi Arabia and top producer Russia seem amicable to a freeze but Iran, whose production has stagnated at 3.6 million barrels per day, wants to ramp up to at 4 million bpd first. [OPEC/M]

“Don’t expect anything unless Iran suddenly changes its mind and agrees to a freeze. But I don’t think they will,” an OPEC source familiar with discussions said.

U.S. investment bank Goldman Sachs cut its price forecast for WTI crude in the fourth quarter to $43 a barrel, from a $45-$50 range, saying it expects supply to exceed demand by 400,000 bpd in the quarter.

U.S. crude stockpiles likely rose an average of 2.8 million barrels in the last week, ending three straight weeks of drawdowns, a Reuters poll showed.

REUTERS