Oil slides over doubts to freeze output

Iran’s plan to boost crude production is dimming prospects of collective action

Oil declined amid doubts that producers will agree on a deal to stabilise the market when suppliers meet next month for informal talks.

Futures decreased as much as 1.8 per cent in New York after rising the previous two sessions. Iran’s plan to continue boosting crude output until it regains its pre-sanctions Opec market share is dimming prospects of collective action, according to Patrick Allman-Ward, chief executive officer of Dana Gas. UAE Oil Minister Suhail Al Mazroui said in a Twitter post that the oil market should achieve stability soon.

Oil entered a bull market August 18, less than three weeks after tumbling into a bear market, as prices surged partly on speculation that discussions among members of the Organisation of Petroleum Exporting Countries (Opec) may lead to action to stabilise the market.

A deal to freeze output was proposed in February, but a meeting in April ended with no final accord.

“There’s very little reason to believe there will be any freeze resolution,” Bjarne Schieldrop, chief commodities analyst at bank SEB AB, said by phone from Oslo. “Iran is making it very explicit: We are not going do any freeze deal unless we are back to 4 million barrels.”

West Texas Intermediate for October delivery dropped as much as 86 cents to $46.78 a barrel on the New York Mercantile Exchange and was at $47.08 at 3:47pm in Dubai. The contract gained 31 cents to $47.64 on Friday, trimming a weekly decline. Total volume traded was about 45 per cent below the 100-day average. Prices slid 1.8 per cent last week.

Market deal

Brent for October settlement lost as much as 87 cents, or 1.7 per cent, to $49.05 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.22 to WTI.

Any decision to stabilise the market will require the full participation of all Opec members and major suppliers from outside the group, Al Mazroui said. The UAE is the fourth-biggest Opec producer, pumping 2.93 million barrels a day in July. Saudi Arabian output was 10.43 million a day the same month.

“I’m not overly optimistic about an oil freeze being agreed,” Allman-Ward of Dana Gas said Sunday in a television interview on ‘Bloomberg Markets Middle East’ in Dubai.

“There’s pressure with Iran working to increase production. The environment is not that conducive to a freeze.”