Brent oil dropped after a pledge by Russia and Saudi Arabia to cooperate to stabilize the market failed to include any specific measures to bolster prices.
Futures fell as much as 1.3% in London after climbing 4.8% over the previous two sessions. Brent jumped as much as 5.5% on Monday as news broke that Saudi Arabia and Russia would make a “significant” statement about the oil market.
Prices pared gains as the two nations stopped short of revealing any concrete steps to limit output. Iran said it will support any decision by oil producing nations to stabilize markets but stopped short of saying whether it would participate in a coordinated effort to freeze crude production.
“For a couple of hours, the market was getting its hopes up, that they would announce a strategy that would impact the physical market, but they were not close to meeting those expectations,” said Jens Naervig Pedersen, an analyst at Danske Bank.
“They under-delivered in the sense that it was quite vague in terms of targets for output.”
Brent rose the most in three weeks on Friday after President Vladimir Putin said he’d like the members of the Organisation of Petroleum Exporting Countries (OPEC) and Russia to agree to a production freeze, speaking before he travelled to China to meet Saudi Deputy Crown Prince Mohammed bin Salman.
Oil had rallied in August on speculation that members of the OPEC and other producers would agree to cap output when they meet in Algiers later this month. A similar proposal was derailed in April over Saudi Arabia’s insistence that Iran participate.
Brent for November settlement fell as much as 61 cents and was down 21 cents at $47.42 a barrel on the London-based ICE Futures Europe exchange at 11:58 a.m. local time. The contract closed at $47.63 on Monday, up 1.7%.
West Texas Intermediate for October delivery was at $44.99 a barrel on the New York Mercantile Exchange, up 55 cents from Friday’s close. Because of the US Labour Day holiday, electronic transactions from Monday will be booked with Tuesday’s for settlement purposes. WTI for November was trading at a $1.83 discount to Brent for the same month.
Saudi Energy Minister Khalid Al-Falih said on Monday there’s no need to freeze output now, though he’s optimistic the Algiers meeting this month will lead to an agreement among producers.
His Russian counterpart, Alexander Novak, said the two nations were seeking ways to ease oil-market volatility. Both were attending the G-20 summit in China.
Prices between $50 and $60 a barrel is what’s best for OPEC nations, Iran’s oil minister Bijan Namdar Zanganeh said during a joint press conference with Mohammed Barkindo, the secretary general of OPEC, according to the ministry’s Shana news service.
His views echoed what Novak said, describing that range as being fair to producers and consumers.
Zanganeh didn’t elaborate whether his support depended on the Persian Gulf nation regaining its lost market share following years of sanctions over its nuclear program.
Venezuela supports Russia-Saudi efforts to stabilize prices, according to the country’s oil minister, Eulogio Del Pino. Several other OPEC countries also welcomed the joint pledge to cooperate, including the United Arab Emirates, Kuwait and Qatar.
Oil demand began to exceed supply in June and July, according to BP Iran remains the key hurdle to any OPEC action on output, according to a report from Citigroup.