Oil extended declines to slip below US$46 a barrel amid skepticism over OPEC’s ability to reach an agreement to cut output as representatives meet on Monday amid last-minute negotiations to reach a deal.
Futures fell as much as 2 percent in New York after dropping 4 percent on Friday. Saudi Arabia for the first time on Sunday suggested OPEC doesn’t necessarily need to curb output and pulled out of a scheduled meeting with non-member producers, including Russia.
OPEC will hold an internal meeting in Vienna Monday to resolve its differences. As part of the final push to reach an agreement, oil ministers from Algeria and Venezuela are heading to Moscow to get the biggest producer outside the group on board.
The Organization of Petroleum Exporting Countries is heading into the final stretch before its Nov. 30 meeting to adopt a deal first floated in September to collectively reduce output. Oil prices whipsawed last week as various OPEC members and Russia tried to position themselves in the overall plan to reduce supply and help boost prices.
Saudi Arabia is seeking to reverse the group’s pump-at-will policy but the country’s energy minister Khalid Al-Falih said on Sunday the oil market will recover in 2017 even without cuts.
“The past weeks’ back and forth of diplomacy reveals how small the common denominator is,” Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. in Zurich, said by e-mail. “Chances for a deal are high but we remain skeptical that it has teeth and see no lasting impact on prices.”
West Texas Intermediate for January delivery dropped as much as 92 cents to US$45.14 a barrel on the New York Mercantile Exchange and was at US$45.55 at 8:53 a.m. in London. Prices lost US$1.90 to US$46.06 a barrel on Friday. Total volume traded was more than double the 100-day average.
Brent for January settlement fell as much as 96 cents, or two percent, to US$46.28 a barrel on the London-based ICE Futures Europe exchange. The contract dropped US$1.76, or 3.6 percent, to US$47.24 a barrel on Friday. The global benchmark traded at a US$1.14 premium to WTI.
Global crude demand will recover next year and then prices will stabilize, even without production cuts from OPEC, Al-Falih said in Dhahran, eastern Saudi Arabia, on Sunday, according to the Saudi newspaper Asharq al-Awsat. The oil-producer group doesn’t have a single path to cut output and it can also depend on recovery in consumption, especially from the U. S., the oil minister said, according to the newspaper.
OPEC needs to reach an internal consensus on output curbs before Russia can join a pact, the country’s energy ministry said in a statement, citing Minister Alexander Novak. Russia has so far resisted OPEC’s request that it join the cut, offering instead to freeze production at its current level.
Algeria’s Energy Minister Noureddine Boutarfa, architect of the group’s preliminary agreement reached in Algiers, will travel Monday to Moscow with his Venezuelan counterpart before meeting Iraq’s oil minister Tuesday in Vienna, according to two OPEC delegates with knowledge of the plan. He presented a proposal Saturday to Iranian Oil Minister Bijan Namdar Zanganeh for an output cut of 1.1 million barrels a day for OPEC and 600,000 barrels a day for non-member countries.
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