Oil prices drop as output hopes dampen

Oil prices fell Friday as OPEC’s key producers cast
doubt on the need to cut output, denting hopes of
a deal to tackle a global supply glut.
Iranian Oil Minister Bijan Zanganeh on Friday said
his country wanted its pre-sanctions share of the
crude market.
His comments followed a warning by Saudi Energy
Minister Khalid Al-Falih regarding the success of a
gathering in Algeria next month on world output
levels.
Around 1230 GMT, US benchmark West Texas
Intermediate for delivery in October was down 18
cents at $47.15 a barrel.
Brent North Sea crude for October delivery lost 32
cents to $49.35 a barrel compared with the close
on Thursday.
“Comments from the Saudi energy minister quelled
expectations of a production freeze, which
rekindled concerns over the ongoing oversupply,”
said Lukman Otunuga, research analyst at trading
group FXTM.
Oil prices had rallied last week and entered a bull
market — a 20-percent rise from recent lows — after
OPEC and Russia announced plans to discuss the
supply crisis, which has hammered the crude
market for more than two years.
But prices have taken a beating this week on
concerns about prospects for success at the
September meeting in Algiers.
In an interview with Bloomberg News, Falih said: “I
don’t believe that an intervention of significance is
required. I certainly don’t advocate a cut.”
But he added that a “freeze (in output around
current levels) signifies that everybody is content
with where the market is today and they want it to
be trending in that direction”.
A previous OPEC attempt to steady output
collapsed in April largely because of Iran’s refusal
to join talks, having just emerged from international
sanctions and keen to maximise its oil revenues.
However, even if a deal is reached next month on
the sidelines of an energy conference, there are
doubts about the impact a production cap may
have on an already oversupplied market.
“Most of the OPEC countries are sending a signal
that they’re open to freezing production, but you
have to remember that most of them are producing
at peak levels,” BMI Research oil and gas analyst
Peter Lee told AFP.
“Even if producers come to an agreement, the
freeze is at a very high level.”
Lee added that he is “personally quite sceptical”
about whether producers can come to an agreement
in Algiers.
“It’s not just the matter of a production freeze or a
cap, but there are geopolitical concerns involved
too, especially when it comes to Iran and Saudi
Arabia,” he said.

Source: Punch