NEW YORK (DTN) -- New York Mercantile Exchange oil futures settled lower Tuesday afternoon after Saudi Arabia and Iran failed to find a compromise on production levels, prompting profit-taking after the prior day's rally.
Reports from the Algerian capital of Algiers, where the Organization of Petroleum Exporting Countries and non-OPEC oil producers are attending the International Energy Forum since Monday, indicate the Saudis and Iranians remain far apart on reaching an accord on crude production rates ahead of an informal meeting by OPEC on Wednesday.
Iran's oil minister Binjan Zanganeh said his country was unwilling to freeze oil production at its current output rate near 3.7 million bpd as sought by Saudi Arabia, intent on reaching its previously announced target of 4.0 million bpd. The Saudis offered to cut oil production to their January output rate of 10.23 million bpd in exchange.
"People were too optimistic," said Kevin Norrish, head of commodity research at Barclays Capital. "OPEC hasn't restrained production since 2008, so the practicality of freezing production was always going to be difficult."
Both Zanganeh and Saudi Arabian Energy Minister Khalid al-Falih said they would continue to consult and expect to find consensus by the time OPEC holds its regularly scheduled biannual meeting in Vienna in November.
Analysts said traders decided to book profits as soon as Iran said they were not in Algiers to make a deal this week.
"The market took that Iranian statement negatively as it looks like a deal won't happen, so this anxiety will continue until November," said Tom Bentz, head of energy derivatives at ABN AMRO. "There are a lot of things that could happen before November."
NYMEX November West Texas Intermediate crude oil futures settled $1.26 lower at $44.67 bbl, off a $44.19 one-week spot low. ICE November Brent futures tumbled $1.38 to a $45.97 bbl settlement, off a $45.63 one-week low.
In products trade, the NYMEX October ULSD futures contract tumbled 3.91cts to a $1.4099 gallon settlement after trading at a $1.3967 one-week low. NYMEX October RBOB futures eased 0.87cts to a $1.3937 gallon settlement, off a two-day low of $1.3655.
The market awaits domestic oil inventory data covering the week-ended Sept. 23 scheduled for release this afternoon by the American Petroleum Institute and at 10:30 a.m. EDT Wednesday by the U.S. Energy Information Administration.
A survey today projected the data would show a 3.25 million bbl build on domestic crude oil inventories and stock draws of 750,000 bbl and 250,000 bbl for gasoline and distillates, respectively.
In currency trade, the U.S. dollar index rose to a two-day high today, with a stronger greenback bearish for oil futures.
George Orwel, 1.718.522.3969, email@example.com, www.schneider-electric.com. (c) 2016 Schneider Electric. All rights reserved.
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.