NEW YORK. Sept 23 — Oil headed for a weekly gain after Saudi Arabia was said to have offered to reduce production if Iran agreed to freeze its output.
Futures traded near US$46 (RM188.92) barrel in New York. The kingdom would be willing to pump less if Iran were to agree to freeze production at its current level of 3.6 million barrels a day, according to two people familiar with the situation who asked not to be identified because the talks were private. The discussions between the two nations ended without agreement yesterday. Now is the right time for a deal, according to Falah Al-Amri, Iraq’s governor to Opec. Prices are unlikely to climb above US$50 a barrel unless the group cuts production, he said.
“There’s a lot of nervousness about the meeting and that’s being reflected in the price action,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “It’s hard to imagine the Iranians settling for such a low level of output.”
Oil has fluctuated since August’s rally on speculation the Organisation of Petroleum Exporting Countries and Russia will agree on ways to stabilise the market when they meet September 28. While Venezuelan President Nicolas Maduro said members are close to a deal, all but two of 23 analysts surveyed by Bloomberg said an agreement to limit production is unlikely. Freezing output was proposed in February, but a meeting in April ended with no final accord.
West Texas Intermediate for November delivery fell 17 cents to US$46.15 a barrel at 10:27am on the New York Mercantile Exchange. The contract touched US$46.55 earlier, the highest since September 9. Total volume traded was 38 per cent above the 100-day average. November futures are up about 7 per cent this week.
Brent for November settlement rose 7 cents to US$47.72 a barrel on the London-based ICE Futures Europe exchange, and are up 4.3 per cent this week. The global benchmark was at a US$1.57 premium to WTI.
For a story on the supply challenge pressuring Opec to act, click here.
Saudi Arabia and Iran met at Opec headquarters in preparation for informal talks in Algiers, according to two people briefed on the discussions. Opec Secretary-General Mohammed Barkindo visited Qatar and Iran this month to build consensus before the gathering. Russian President Vladimir Putin said September 2 that the producers can overcome their divisions to reach a deal.
“There is unlikely to be a voluntary limit to production,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Such an agreement would be at odds with Opec’s current strategy of defending its market shares.” — Bloomberg