Oil traded near a 15-month high in New York amid uncertainty over whether Russia would join an OPEC deal to curb supply.
Futures were little changed after rising 3.1% Monday. Russia’s biggest producer Rosneft PJSC said it won’t cut output, according to Reuters, after President Vladimir Putin said at a conference in Istanbul that his country is willing to join efforts by OPEC to stabilize the market through a production freeze or cut. Oil supply and demand will come back into balance earlier than expected if OPEC’s agreement to curtail output is implemented, the International Energy Agency said.
Oil rose to the highest in more than a year on Monday after Saudi Arabia expressed optimism that Organization of Petroleum Exporting Countries would work out a deal and Russia voiced its support. An increase to $60 a barrel would probably trigger a jump in North American production while trimming global demand growth, IEA Executive Director Fatih Birol said Tuesday. U.S. output has already halted its decline as higher prices revive drilling.
"The Istanbul conference has the market on edge," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "We have inconsistent statements from Putin and Rosneft, which the market’s trying to interpret. There are increasing signs that some action will be taken but skepticism remains."
West Texas Intermediate oil for November delivery fell 5 cents to $51.30 a barrel at 9:20 a.m. on the New York Mercantile Exchange. Prices rose $1.54 to $51.35 on Monday, the highest close since July 2015. Total volume traded was 77 percent above the 100-day average.
Brent for December settlement slipped 11 cents to $53.03 a barrel on the London-based ICE Futures Europe exchange. The contract rose 2.3 percent to $53.14 on Monday, the highest close since Aug. 31, 2015. The global benchmark crude traded at a $1.28 premium to WTI for the same month.
Rosneft Chief Executive Officer Igor Sechin said he doubts some OPEC countries such as Iran, Saudi Arabia and Venezuela would cut their production, Reuters reported Tuesday, citing an interview. An increase in prices above $50 would make U.S. shale projects profitable, he said. Leonid Fedun, vice president of Russia’s second-largest producer, Lukoil PJSC, said the nation’s oil companies will unify behind their government if talks with OPEC result in an agreement.
For a chart showing shale drillers’ reaction to OPEC’s Algiers deal, click here.
OPEC pumped a record 33.64 million barrels of crude a day in September, the IEA said in a report Tuesday. Returning volumes from Libya, Nigeria and Iran suggest that “bigger cuts” would have to be made by others, notably Saudi Arabia, to meet the production ceiling agreed in Algiers last month.
There may be a higher probability of an agreement between Russia and Saudi Arabia to cut production, but the deal may prove self-defeating if the resulting increase in prices boosts supply from other producers, Goldman Sachs Group Inc. said in a note on Monday.
- U.S. inventories probably increased by 1.75 million barrels last week, rising for the first time in six weeks, according to a Bloomberg survey.
- BP Plc said it won’t proceed with oil exploration in the offshore Great Australian Bight, five years after it began looking for resources in the area and before it was allowed to drill any wells.