‘NOT on our AGENDA’ to REACH DEAL in ALGIERS
OIL TUMBLES AS SAUDI AND IRANIAN OFFICIALS DOWNPLAY CHANCE OF DEAL
NEW YORK • Oil dropped after Saudi Arabia said it doesn’t expect a production accord to be reached when OPEC ministers meet Wednesday, but left open the possibility of a deal when they gather in November.
Futures fell 2.7 per cent in New York, continuing the gyrations of recent days.
Saudi Oil Minister Khalid Al- Falih said several potential freeze pacts are being discussed, but that agreement in Algiers is unlikely when ministers meet informally Wednesday. Iran, Nigeria and Libya “have special conditions,” Falih said. Influential forecasters gave a worsening outlook for the market, with the head of the International Energy Agency saying supply and demand won’t be in balance until late 2017 and Goldman Sachs Group Inc. cutting its fourth quarter price forecast.
“The market was falling with the growing realization that there will be no effective OPEC deal, then helped along by the IEA acknowledging the glut persisting through 2017,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Mass.
Oil has fluctuated since rallying in August on speculation major producers will agree on ways to stabilize the market when they meet Wednesday. While Saudi Arabia offered last week to pump less crude if Iran caps output, neither of the neighbouring countries expect an agreement this week.
Freezing output was first proposed in February, but a meeting in April ended with no final accord.
West Texas Intermediate f or November delivery dropped US$ 1. 26 to US$ 44.67 a barrel on the New York Mercantile Exchange. Prices have averaged about US$44.80 this quarter.
Brent for November settlement slipped US$ 1.38, or 2.9 per cent, to US$ 45.97 a barrel on the Londonbased ICE Futures Europe exchange. The global benchmark crude closed at a US$1.30 premium to WTI.
“The fundamentals are slowly moving, so headlines are punching above their weight,” said Harold “Skip” York, vice- president of integrated energy at consulting firm Wood Mackenzie Ltd. in Houston. “Rumours are what moves the market now in the short term.”
Saudi Arabia offered to cut production to January levels, according to Algeria’s Energy Minister. That would remove about half of the kingdom’s one million barrel- a- day increase in output since it led OPEC’s push to defend market share in 2014. The U. A. E. supports a deal to freeze output if other nations agree, but production cuts are not up for discussion, Oil Minister Suhail Al Mazrouei said.
“The market is acutely focused on the headlines from Algiers,” said Adam Wise, who helps run a US$7-billion oil and natural gas bond and private equity portfolio at John Hancock in Boston. “Prices are down today because people don’t think there will be a consensus reached at the meeting.”
It’s “not on our agenda” to reach agreement at the OPEC talks in Algiers, Iranian Oil Minister Bij a n Namdar Zanganeh said in the Algerian capital. Negotiations will be a “warm- up” for the November meeting in Vienna, Iran’s oil ministry news service Shana reported, citing Zanganeh. Iran, which pumped about 3.6 million barrels a day last month, is seeking a 12 to 13 per cent share of OPEC’s market, he added.
OPEC hasn’t published individual targets for its members since October 2006, when the organization set a quota for Iran of 4.1 million barrels and one for Saudi Arabia of 9.1 million barrels.
“The main goal of OPEC is to show that it’s relevant again,” said Bob Minter, a Philadelphia- based investment strategist at Aberdeen Asset Management, which oversees US$ 402 billion. “The most likely scenario is that they will come out of the meeting with a statement pledging to co-operate, but without any specified cuts.”