Oil held near $45 a barrel as Saudi Arabia’s offer to cut output opened the door to a future OPEC deal, even though the kingdom doesn’t expect an agreement this week when members of the group meet.
Futures added 0.1 percent in New York after slumping 4 percent on Friday. While Saudi Arabia and Iran didn’t reach an agreement after two days of preparatory talks in Vienna, the Saudis did offer to pump less crude if Iran caps output, according to two people familiar with the negotiations. Saudi Arabia proposed to cut its production to January levels, Algerian Energy Minister Noureddine Boutarfa said Sunday.
Oil has fluctuated since rallying in August on speculation major producers will agree on ways to stabilize the market when they meet in Algiers on Wednesday. Prices fell on Friday after a delegate of the Organization of Petroleum Exporting Countries said Saudi Arabia doesn’t expect a decision on output at the meeting. Three people with knowledge of the matter also said Russia’s delegation plans to join discussions only after OPEC members reach a consensus.
“It’s a bit of everyone trying to get a bargaining chip into the meeting by throwing around some numbers publicly,” said Michael Poulsen, an analyst at Global Risk Management Ltd. “If they strike a deal, symbolic or not, it will definitely be supportive of prices.”
West Texas Intermediate for November delivery rose as much as 47 cents to $44.95 a barrel on the New York Mercantile Exchange and was at $44.54 as of 9:42 a.m. London time. The contract lost $1.84 on Friday, the biggest decline since July 13. Total volume traded Monday was about 18 percent below the 100-day average. Prices have averaged about $44.80 this quarter.
Brent for November settlement climbed as much as 53 cents, or 1.2 percent, to $46.42 a barrel on the London-based ICE Futures Europe exchange. Prices dropped 3.7 percent to $45.89 on Friday. The global benchmark traded at a $1.31 premium to WTI.
“The Saudis are softening in their approach,” said JBC Asia Managing Director Richard Gorry, referring to the proposal to cut output. “From the Iranians’ perspective, they can’t increase production that much further, so to agree a freeze wouldn’t really hurt them for the next 12 to 18 months,” he said in a Bloomberg Television interview.
For a Gadfly commentary about Saudi Arabia’s stance, click here.
Saudi Arabia pumped a record 10.69 million barrels a day in August, up from 10.2 million in January, according to data compiled by Bloomberg. OPEC and other major producers need to reduce output by 1 million barrels a day to rebalance markets and stabilize prices, Algeria’s Boutarfa said last week.
That target may be ambitious, according to Poulsen, who said “it’s difficult to see a million-barrel-per-day cut.”
