Oil prices slide after jump in U.S. stockpiles
London (Aug 24) Oil prices dropped on Wednesday, as reports of additional growth in U.S. crude stocks wiped out optimism that Iran could agree to a production freeze accord.
An Organization of the Petroleum Exporting Countries delegate told The Wall Street Journal that Tehran had sent a letter to OPEC members that it would attend the informal meeting next September in Algeria. If confirmed, it could signal a reversal in Iran’s stance, as it had declined to attend the last informal meeting back in April where a production freeze pact was discussed.
Light, sweet crude futures CLV6, -2.08% for delivery in October fell 79 cents, or 1.6%, to $47.30 a barrel on the New York Mercantile Exchange. October Brent LCOV6, -1.40% on London’s ICE Futures exchange fell 46 cents, or 0.9%, to $49.50 a barrel.
While Iran’s latest show of willingness boosted prices overnight, analysts are skeptical that any policy changes will result from the meeting.
“This is deja vu all over again, a replay of what we saw four months ago,” said John Driscoll, chief strategist at JTD Energy, referring to the meeting in April in Doha in which OPEC members and Russia had nearly reached an agreement to limit production at the January level. The plan was thwarted last minute when Saudi Arabia, OPEC’s biggest producer and de facto leader, withdrew from the agreement after Iran refused to comply with any production caps.
However, with Iran’s present production level at around 3.6 million barrels a day, the market has higher hopes that Tehran would be more receptive to the pact this time around.
“Now they have regained market share, it would benefit them to move the prices higher,” said Grace Liu, the head of research at Guotai Junan International, but added the long-term political rivalry between Saudi Arabia and Tehran remains a major road block for any agreement.
The bullish sentiment overnight was pared by the bearish estimated growth in U.S. crude stockpiles last week. American Institute Petroleum data showed an increase of 4.5 million barrels, while gasoline stocks fell by 2.2 million barrels, according to market participants.
Official data by the U.S. energy department will be released later Wednesday.
Nymex reformulated gasoline blendstock for September RBU6, -0.64% , the benchmark gasoline contract, fell less than 1 cent, or 0.3%, to $1.49 a gallon.
ICE gasoil for September changed hands at $434.00 a metric ton, down $6.25 from Tuesday’s settlement.