US investment bank Goldman Sachs cut its price forecast for WTI crude in the fourth quarter to $43 a barrel
By Libby George and Swetha Gopinath
LONDON (Reuters) – Crude oil futures fell on Tuesday as optimism faded for an output-limiting deal from an oil producer meeting in Algeria to curb one of the worst supply gluts in history.
Saudi Arabia dashed hopes on Tuesday that producers could clinch a deal at the Sept. 26-28 informal meeting of OPEC and other producers including Russia after sources within the exporter group said differences between the kingdom and rival Iran remained too wide.
The Saudi and Russian energy ministers will give a joint briefing in Algiers later on Tuesday but there was no sign of a deal.
Brent crude futures fell $1.30 to $46.05 a barrel by 1331 GMT, having closed up $1.46, or 3.2 per cent, in the previous session.
U.S. West Texas Intermediate (WTI) crude dropped $1.31 cents to $44.62 a barrel, after rising $1.45, or 3.3 per cent, in the previous session.
“It’s all about what’s going on in Algiers really … the prospect or no prospect of a supply deal,” Olivier Jakob, oil analyst at Petromatrix, said. “There is no new fundamental development that is more important than Algiers.”
Sources told Reuters last week that Saudi Arabia had offered to reduce its output if Iran agreed to freeze production. But Iran played down the chances of a deal, saying the meetings in Algiers were only advisory.
Russia’s oil minister on Tuesday also said that the country would want to freeze oil output at current levels; Russia’s oil output recently touched an all-time high of 11.75 million bpd.
Analysts said that current high production in Russia and Saudi Arabia, combined with potential increases from Libya and Nigeria, made discussions in Algiers somewhat hollow.
“The announcements in Algeria contrast sharply with reality,” analysts at Commerzbank said in a note, adding “all the signs point therefore to the comfortable supply situation continuing, that is to say to ongoing overproduction.”
U.S. investment bank Goldman Sachs cut its price forecast for WTI crude in the fourth quarter to $43 a barrel, from a $45-$50 range, saying that it expects global supply to exceed demand by 400,000 barrels per day (bpd) in the quarter.
Aside from OPEC, a strong U.S. dollar, which makes commodities like crude oil more expensive for holders of other currencies also pressured oil prices.
Traders were also watching for U.S. oil stock data due later on Tuesday from the American Petroleum Institute.
US commercial crude oil stocks likely rose by an average of 2.8 million barrels to 507.4 million barrels in the week to Sept. 23, reversing three weeks of unexpected drawdowns, a Reuters survey of seven analysts forecast. (Additional reporting by Keith Wallis, editing by Jane Merriman and Susan Fenton)