Oil resumes decline amid doubts of market-stabilization deal
NEW YORK (Bloomberg) -- Oil declined amid doubts that producers will agree on a deal to stabilize the market when global suppliers meet next month for informal talks.
Futures decreased as much as 2.1% in New York. Iran’s plan to continue boosting crude output until it regains its pre-sanctions OPEC market share is dimming prospects of collective action, according to Patrick Allman-Ward, CEO of Dana Gas PJSC. United Arab Emirates Oil Minister Suhail Al Mazrouei said in a Twitter post that the oil market should achieve stability soon. The dollar rose, curbing the appeal of commodities as an investment.
Oil entered a bull market Aug. 18, less than three weeks after tumbling into a bear market, as prices surged partly on speculation that discussions among members of the Organization of Petroleum Exporting Countries may lead to action to stabilize the market. An output freeze was proposed in February, but talks in April ended with no final accord. For a second week, money managers slashed bets on falling West Texas Intermediate crude prices by a record.
"The short-covering rally has come to an end," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "There are two reasons for this: the likelihood of an agreement to freeze output is becoming less-and-less likely all the time and the dollar’s relative strength."
WTI for October delivery dropped 91 cents, or 1.9%, to $46.73/bbl at 9:22 a.m. on the New York Mercantile Exchange. The contract gained 0.7% to $47.64 on Friday, trimming a weekly decline. Total volume traded was 40% below the 100-day average.
Dollar rally
Brent for October settlement fell 87 cents, or 1.7%, to $49.05/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.32 premium to WTI.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, advanced as much as 0.3 percent to the highest level since Aug. 9.
“I’m not overly optimistic about an oil freeze being agreed,” Allman-Ward of Dana Gas said Sunday in a television interview on "Bloomberg Markets Middle East" in Dubai. “There’s pressure with Iran working to increase production. The environment is not that conducive to a freeze.”
While Iran supports action to stabilize the market, it won’t participate in a freeze in output before regaining its pre-sanctions share of OPEC production, state-run news service Shana reported Friday, citing Oil Minister Bijan Namdar Zanganeh.
Little reason
“There’s very little reason to believe there will be any freeze resolution,” said Bjarne Schieldrop, chief commodities analyst at bank SEB AB in Oslo. “Iran is making it very explicit: We are not going do any freeze deal unless we are back to 4 MMbbl.”
Any decision to stabilize the market will require the full participation of all OPEC members and major suppliers from outside the group, Al Mazrouei said. The UAE is the fourth-biggest OPEC producer, pumping 2.93 MMbopd in July. Saudi Arabian output was 10.43 MMbopd the same month.
