Oil Slumps 4%, Concerns of No-Deal on OPEC Output Freeze

Saudi Offer Oil Cut for OPEC Deal if Iran Freezes Output

تم نشره في Sat 24 September / Sep 2016. 12:00 AM - آخر تعديل في Sat 24 September / Sep 2016. 09:53 PM
  • A view of an oil refinery off the coast of Singapore. – (Reuters)

NEW YORK/ DUBAI/LONDON  Oil prices tumbled 4 per cent on Friday on signs Saudi Arabia and Iran were making so little progress in achieving preliminary agreement ahead of talks by major crude exporters next week aimed at freezing production.

Additionally, US data on oil rig additions for the quarter citing highest since the price crash in 2014, next to fluctuations in Wall Street and other world stock markets, doubly bearish the prospects of oil market recovery soon.

Saudi Arabia has offered to reduce oil production if rival Iran caps its own output this year, four sources familiar with the discussions told Reuters, as Riyadh tries to strike an elusive OPEC deal to curtail supply and boost prices.

Brent crude futures dropped down USD1.76, or 3.7 per cent, to USD45.89 a barrel, having rised over the week an average turnout of 0.3 per cent, accounting for gains in the past two sessions.

US West Texas Intermediate (WTI) crude futures CLc1 fell USD1.84, or 4 per cent, to settle at USD44.48, while on the week, WTI gained 3 per cent.

Crude futures slumped after sources said Saudi Arabia did not expect a decision in Algeria where the Organization of the Petroleum Exporting Countries and other big oil producers were to convene for Sept 26-28 talks.

Earlier, the market rallied when Reuters reported that Saudi Arabia had offered to reduce production if Iran caps its own output this year.

Oil prices are typically volatile before OPEC talks and Friday's session was tempered with caution despite market sentiment on a high this week after the US government reported on Wednesday a third straight weekly drop in crude stockpiles.

"A 'No Deal' result in our definition will be one where OPEC not only failed to get an explicit deal out of the meetings, but also failed to develop a forward plan," Macquarie Capital said in a note, referring to the Algeria talks. "This would be another epic fail by OPEC."

The Alegria talks are OPEC's second attempt for an agreement on production curbs, after a failed effort in May. The market has been sceptical of OPEC's commitment, though, as key members of the group, led by Saudi Arabia and Iran have been pumping at optimum levels to protect market share.

Non-OPEC member Russia, the world's largest oil exporter, also hit record highs in production this week.

The production spike, rhetoric from OPEC and recent declines in US stocks have kept crude in a USD40-USD50 range after 12-year lows of around USD26 set in the first quarter.

"Let us reiterate that we still don't expect that a fundamentals driven rally will be strong enough to drive prices above USD50 per barrel until Q1 or Q2 of next year," Credit Suisse said in a note. "Equally, however, we don't see a good fundamentals-based case for prices to collapse and set new cycle-lows all over again."