Oil Tumbles as Saudis Said to See Algiers Talks as Consultation

(Bloomberg) -- Oil fell the most in more than two months after Saudi Arabia was said to dismiss the prospects for an output agreement to stabilize the market in talks in Algiers next week.

Futures dropped 4 percent in New York. The kingdom doesn’t anticipate any decision to be made about supply, according to an OPEC delegate familiar with Saudi Arabian policy. Prices climbed earlier on Friday after Saudi officials were said to have made a proposal to their Iranian counterparts to lower the kingdom’s production in exchange for Tehran agreeing to freeze its own output, currently at 3.6 million barrels a day.

"Oil is tanking and it’s the Saudi headlines that are responsible for the move," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.

Nonetheless, Riyadh will work with other member countries to stabilize the oil market in the run-up to the group’s next official gathering in Vienna in November, the delegate said, asking not to be identified because the matter is private.

West Texas Intermediate for November delivery fell $1.84 to settle at $44.48 a barrel on the New York Mercantile Exchange. It’s the biggest decline since July 13. Futures touched $46.55 earlier, the highest intraday price since Sept. 9. Total volume traded was 20 percent above the 100-day average at 2:57 p.m. The November contract rose 2 percent this week.

Producer Talks

Brent for November settlement dropped $1.76, or 3.7 percent, to $45.89 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 0.3 percent this week. The global benchmark closed at a $1.41 premium to WTI.

Oil has fluctuated since August’s rally on speculation the Organization of Petroleum Exporting Countries and Russia will agree on ways to stabilize the market when they meet Sept. 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.

There have been meetings from Vienna and Paris to Moscow as oil producers attempt to reach a consensus. Saudi and Iranian oil officials discussed a proposal at the OPEC headquarters in two-day talks that ended Thursday without a deal, one of the people 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."

Russian Delegation

The Russian delegation, set to include Energy Minister Alexander Novak, will participate in the International Energy Forum in Algiers and hold bilateral meetings with other producers, but may leave before OPEC members hold informal talks, said three people with knowledge of the matter, asking not to be identified because the information isn’t public.

Russia pumped a record 11.09 million barrels a day this month, Energy Ministry data showed Sept. 21.

The last attempt at a deal between OPEC and Russia collapsed in Doha on April 17 when Saudi Arabia’s influential Deputy Crown Prince Mohammed bin Salman insisted at the last minute that Iran had to participate in a freeze. Iran refused as it was just starting to revive exports following the end of sanctions.

Oil-market news:

• Oil explorers added more rigs in the U.S., taking advantage of nearly half-off discounts for the drilling gear during the worst crude-market crash in a generation.
• Goldman Sachs Group Inc. and Morgan Stanley’s sometimes lucrative romance with metals, coal and oil could become prohibitively expensive under a rule proposed Friday by the Federal Reserve.
• Nigeria’s planned output boost gathered pace as the African country issued programs to load two grades of crude that have been blocked for months following militant attacks on pipelines.

--With assistance from Javier Blas To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Carlos Caminada, Stephen Cunningham