Brent crude futures ease as hope for output freeze fades

Tue Sep 6, 2016 3:26pm EDT
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By Scott DiSavino

NEW YORK (Reuters) - Global benchmark Brent crude fell almost 1 percent on Tuesday as hopes waned for an agreement between two of the biggest oil producers to freeze output to tackle a global supply glut.

Brent had jumped 5 percent on Monday, after Saudi Arabia and Russia agreed to cooperate in world oil markets. But Brent pared gains later that session after Saudi Energy Minister Khalid al-Falih said there was no need to freeze output for now.

Still, his Russian counterpart Alexander Novak said he was open to ideas on what cut-off period to use if countries chose to freeze output, and said even production cuts could be considered.

On Tuesday, Brent futures for November delivery fell 37 cents, or 0.8 percent, to settle at $47.26 a barrel. U.S. crude, meanwhile, rose 39 cents, or 0.9 percent from Friday's settlement, to $44.83 per barrel. U.S. crude did not settle on Monday due to the Labor Day holiday.

U.S. trading was thin following the long Labor Day holiday weekend. Traders said U.S. crude was supported by Genscape data showing a draw of some 700,000 barrels last week at the Cushing, Oklahoma, delivery hub for U.S. crude futures.

The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria on Sept. 26-28. Many in the market are skeptical a deal will happen.

"The reaction so far suggests that talk is no longer enough to support prices; the market needs to see action," Tim Evans, energy futures specialist at Citi Futures, said in a note.

"While talk of a production freeze is easy, achieving one will be more difficult, with Iran still poised to increase output to 4.0 (million barrels per day) and Nigeria plotting a recovery."   Continued...

A worker looks on at the Bashneft-Ufaneftekhim oil refinery outside Ufa, Bashkortostan, Russia January 29, 2015. REUTERS/Sergei Karpukhin/File Photo