On Tuesday, crude oil futures dropped as confidence contracted for an output-limiting deal from an oil producer meeting in Algeria to limit one of the worst supply gluts in history. Saudi Arabia ruined hopes on Tuesday that producers could close a deal at the Sept. 26-28 informal meeting of OPEC and other producers including Russia after sources within the exporter group commented differences between the kingdom and rival Iran remained too far apart. The Saudi and Russian energy ministers will give a joint discussion in Algiers later on Tuesday but there was no indications of a deal on the table.
Brent crude futures dropped $1.30 to $46.05 a barrel by 1331 GMT (9.31 a.m. ET), having closed higher $1.46, or 3.2 percent, in the previous session. U.S. West Texas Intermediate (WTI) crude decreased $1.31 cents to $44.62 a barrel, after rising $1.45, or 3.3 percent, in the last session.
“It’s all about what’s going on in Algiers really … the prospect or no prospect of a supply deal,” Olivier Jakob, oil analyst at Petromatrix, stated. “There is no new fundamental development that is more important than Algiers.”
Sources reported last week that Saudi Arabia had offered to trim its output if Iran agreed to freeze production. But Iran downplayed the possibilities of a deal, adding the meetings in Algiers were only advisory. Russia’s oil minister on Tuesday also noted that the country would want to freeze oil output at current levels; Russia’s oil output recently reached an all-time high of 11.75 million bpd. Analysts also added that current high production in Russia and Saudi Arabia, combined with potential advances from Libya and Nigeria, made discussions in Algiers somewhat flat.
“The announcements in Algeria contrast sharply with reality,” analysts at Commerzbank commented in a report, adding “all the signs point therefore to the comfortable supply situation continuing, that is to say to ongoing overproduction.”
U.S. investment bank Goldman Sachs reduced its price outlook for WTI crude in the fourth quarter to $43 a barrel, from a $45-$50 range, stating that it anticipates global supply to exceed demand by 400,000 barrels per day (bpd) in the quarter.
Aside from OPEC, a robust U.S. dollar, which makes commodities like crude oil more costly for holders of other currencies, also pressured oil prices. Traders were also viewing for U.S. oil stock data due later on Tuesday from the American Petroleum Institute (API). U.S. commercial crude oil stocks likely increased by an median of 2.8 million barrels to 507.4 million barrels in the week to Sept. 23, reversing three weeks of surprising drawdowns, a survey of seven analysts projected.