Oil worker Opec
Reimposed sanctions on Iran by the US and output declines from Venezuela may tighten the market further. Image Credit: Reuters

New York: Oil retreated after the biggest two-day gain since June as investors grapple with doubts over whether the Organisation of Petroleum Exporting Countries (Opec) and its allies will curb production.

Futures slipped as much as 2.1 per cent in New York, paring gains of 4.6 per cent in the previous two sessions. Saudi Energy Minister Khalid Al Falih said it’s “premature” to say whether the producer group will agree on efforts to stabilise the oversupplied market and walked back recent statements about the size of any supply reduction.

Meanwhile, industry data signalled crude stockpiles in America expanded last week.

Crude breached $53 (Dh194.67) a barrel for the first time in almost two weeks after Russian President Vladimir Putin and Saudi Crown Prince Mohammad Bin Salman agreed they would cooperate on managing the oil market. But in talks between officials after that meeting, Saudi Arabia argued Russian proposals, which implied Moscow would cut by a maximum of 150,000 barrels a day, would leave the kingdom shouldering too much of the burden.

“Al Falih’s comments came only days before the actual meeting, creating uncertainties that are keeping the market unstable,” said Hong Sungki, a commodities trader at NH Investment & Securities Co in Seoul. “It also shows Saudi Arabia is unhappy with Russia’s reluctance to actively support the group’s effort to curb production to bolster prices.”

West Texas Intermediate (WTI) for January delivery dropped as much as $1.09 to $52.16 a barrel on the New York Mercantile Exchange, and was at $52.34 at 2.05pm in Seoul. Futures closed at $53.25, up 30 cents, on Tuesday. Total volume traded was about 76 per cent above the 100-day average.

Brent for February settlement fell $1.16 to $60.92 a barrel on London’s ICE Futures Europe exchange, after rising 39 cents on Tuesday. The global benchmark crude was at an $8.38 premium to WTI for the same month.

In an interview with Bloomberg, Al Falih said Moscow backs curbs “in principle,” but it’s too early to say what they will agree to. On the size of cuts, he said the group still needs to “figure out what needs to be done and by how much.”

The comments were less definitive than those made last month, when he called for a reduction of 1 million barrels a day.

The world’s two top oil exporters will have another chance to hammer out a deal when Al Falih and his Russian counterpart Alexander Novak attend the Joint Ministerial Monitoring Committee’s meeting in Vienna Wednesday, a day ahead of the full Opec gathering on December 6. The panel oversees compliance of the 2016 output pact between Opec and its partners.

President Donald Trump’s constant pressure on Opec to lower prices may further complicate the deliberations in Vienna. Trump is seen as one of Prince Mohammad’s few remaining allies in Washington after the murder of Jamal Khashoggi generated intense criticism from American lawmakers.

In the US, the American Petroleum Institute was said to report nationwide crude stockpiles increased 5.36 million barrels last week. If confirmed by government data on Thursday, it will mark an 11th consecutive week of gains. Inventories for gasoline and diesel were also said to have risen.