Oil pared its biggest drop in more than two months as Saudi Arabia’s offer to cut output opens the door to a future Opec deal, even as it doesn’t expect an agreement this week when members of the group meet.
Futures advanced as much as 1.1 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 kingdom did offer to pump less crude if Iran caps output at current levels, 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 the Organization of Petroleum Exporting Countries and Russia will agree on ways to stabilize the market when they meet in Algiers on Wednesday. The chance that a deal this week will include Russia has slimmed as its delegation plans to join discussions only after Opec members reach a consensus among themselves, said three people with knowledge of the matter.
“It’s significant in that it shows that the Saudis are softening in their approach,” said Richard Gorry, managing director at JBC Asia, 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.
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 $44.79 at 7:51 a.m. in London. The contract lost $1.84 to $44.48 a barrel on Friday, the biggest decline since July 13. Total volume traded was about 43 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 $1.76, or 3.7 percent, to $45.89 on Friday. The global benchmark traded at a $1.42 premium to WTI.
Saudi Arabia pumped a record 10.69 million barrels a day in August compared with 10.2 million in January, according to data compiled by Bloomberg. Opec and other major producers need to cut output by 1 million barrels a day to re-balance markets and stabilize prices, Algeria’s Boutarfa said last week.
Russia hasn’t received offers from other producers about a possible output cut, and the lack of an agreement in Algiers would not be critical for the country, Russian Energy Minister Alexander Novak said, according to a RIA Novosti report on Sunday. Money managers increased their short position in WTI by 50,558 futures and options during the week ended Sept. 20, according to the Commodity Futures Trading Commission.