Oil Market Drifts Lower On Deal Doubts

Oil market drifts lower on deal doubts

LONDON, (APP - UrduPoint / Pakistan Point News -6th Sept,2016) : World oil prices nudged lower Tuesday as doubts grew over a Russian-Saudi pledge to address a chronic global supply glut. At 1600 GMT, US benchmark West Texas Intermediate for October delivery declined seven cents to $44.37 per barrel.

Brent North Sea crude for November fell 73 cents to $46.90 a barrel compared with the previous day's closing level. Prices had briefly surged Monday on news that Saudi Energy Minister Khaled Al-Falih and Russian counterpart Alexander Novak were to make an announcement after meeting at the G20.

However, the bumper gains were all but wiped out after the statement underwhelmed the market and provided scant detail about their plans. Falih added however that there was "currently no need" to freeze production.

"The optimism generated by yesterday's deal between Russia and Saudi Arabia seems to have petered out," noted analyst Wayne Heap at British-based brokerage love Energy. Falih and Novak agreed to act together to steady the market -- but stopped short of an output freeze.

"Oil prices continued to slide on Tuesday after the temporary spike on Monday proved unjustified by the limited agreement to cooperate between Russian and Saudi oil ministries," said CMC Markets analyst Jasper Lawler.

"It would appear the price spike on Monday was used as an opportunity for those who believe there will be no agreement on freezing output at this month's unofficial OPEC meeting to sell oil futures." The two ministers said Monday that they will act "together or in cooperation with other oil producers" and agreed to set up a "joint monitoring group" to offer recommendations to prevent price fluctuations.

The Organization of the Petroleum Exporting Countries (OPEC), the 14-nation cartel which produces about one third of the world's oil, will meet informally with Russia later this month in Algeria to discuss a possible output freeze in order to boost prices.

The previous attempt at reaching a deal in April was scuppered by OPEC member Iran's refusal to agree to any production freeze, and there are worries about the chances of a deal in Algiers. - Desired price - ================== Separately Tuesday, Iran's oil minister Bijan Zanganeh said the Islamic republic "supports any decision to return stability to oil markets", in comments cited by the Shana news agency.

He added: "The desired price for most OPEC members for oil is between 50 and 60 Dollars". Zanganeh, speaking after a meeting with OPEC secretary-general Mohammed Barkindo in Tehran, added that $55 per barrel "brings desired, economic and beneficial oil production revenue for OPEC members, while their competitors won't be able to increase production".

Iran briefly triggered a spike in prices late last month when it announced it would participate in the meeting, but Zanganeh stated on August 26 that Iran wanted to return to its pre-sanctions share of the crude market before considering any kind of cap.

Tehran says it has doubled its exports of oil and gas to 2.7 million barrels per day (bpd) since signing a nuclear deal with world powers that ended sanctions in July last year. Its total production has risen from 2.7 million bpd to 3.85 million bpd, close to the level before international sanctions were imposed in 2012.

A previous OPEC attempt to freeze output collapsed in April -- three months after the nuclear deal came into effect -- largely because of Iran's refusal to join talks.