Oil Tumbles to One-Month Low as OPEC Accord Remains Unresolved

(Bloomberg) -- Oil tumbled to a one-month low after weekend talks between OPEC and other major producers failed to yield concrete details on an accord to reduce the global crude surplus.

Crude fell 3.8 percent in New York, the biggest drop in five weeks. The Organization of Petroleum Exporting Countries ended talks with non-members such as Russia and Brazil on Saturday without an agreement, Brazil's Oil and Gas Secretary Marcio Felix said. The previous day, OPEC still hadn't resolved how to allocate among its members an output cut announced last month. Iraq has joined Iran, Nigeria and Libya in seeking to be excluded from any curbs.

Oil traded near $50 a barrel after OPEC's first agreement to reduce output in eight years was reached in Algiers on Sept. 28. Prices fell five of the six past sessions as doubts about the group's ability to implement the cuts at its official November meeting. As the gathering opened in Vienna last week, Secretary-General Mohammed Barkindo warned of the consequences if producers don't follow through on an agreement to reduce output. The price recovery has already taken far too long, he said.

"People are getting weary about the chances of OPEC and non-OPEC coming to an agreement to cut supply," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "There are so many requests for exemptions one has to wonder who will be left to make the cuts."

West Texas Intermediate for December delivery dropped $1.84 to $46.86 a barrel on the New York Mercantile Exchange. It's the lowest close since Sept. 27. Total volume traded was 5.3 percent below the 100-day average. Prices slipped 2.9 percent this month.

OPEC Meeting

Brent for December settlement, which expired Monday, fell $1.41, or 2.8 percent, to $48.30 a barrel on the London-based ICE Futures Europe exchange. It's the lowest close since Sept. 27. The North Sea crude slipped 1.5 percent in October. The global benchmark ended the session at a $1.44 premium to WTI. The more-active January contract declined $2.07 to $48.61.

Technical factors are also weighing on prices. WTI settled below the 50-day moving average for the first time since September and is nearing the 100-day moving average.

For a story on money managers increasing bearish bets on WTI, click here.

Energy shares were the worst performers on the Standard & Poor's 500 Index. The S&P Oil & Gas Exploration and Production Select Industry index dropped as much as 2.6 percent to the lowest level since September.

OPEC agreed in Algiers last month to trim output to a range of 32.5 million to 33 million barrels a day and is due to finalize the deal at its Nov. 30 summit in Vienna. The accord helped push prices to a 15-month high above $50 a barrel earlier this month, although they have subsequently fallen amid doubts the group will follow through on the pledge. 

Inconclusive Talks

More than 18 hours of talks over two days in the Austrian capital this weekend yielded little more than a promise that the world's largest producers would keep on talking.

Some progress was made Friday on the methodology to be used for allocating output quotas to OPEC members, said one delegate, who asked not to be identified because the talks were private. Russia reiterated that it's willing to freeze production, rather than cut, but only if there is an OPEC agreement first, according to participants at a meeting on Saturday.

“The price balloon is deflating in response to increasing doubts that OPEC will deliver a credible agreement on production control,” said David Hufton, chief executive officer of brokers PVM Group in London. "The combined OPEC and non-OPEC dance rhythm is one step forward followed by two steps back.”

Money managers increased bets on lower WTI prices for the first time in five week as Iraq joined the growing list of OPEC members in seeking an exemption to output cuts. That helped send net length lower in the week ended Oct. 25, Commodity Futures Trading Commission data show. Brent net length also dropped, according to data from ICE Futures Europe.

Oil-market news:

• Russian crude production rose to an average of 11.205 million barrels a day in October, according to preliminary Energy Ministry data compiled by Bloomberg. That's 10,000 barrels a day higher than September.
• Iraq published data showing a rare level of detail for its oil production and exports as it seeks an exemption from OPEC's planned output cuts.
• Libyan crude production increased to 640,000 barrels a day, according to a National Oil Corp. official.
• General Electric Co. is creating a $32 billion oil business by combining its petroleum-related operations with Baker Hughes Inc., betting on an industry rebound.

--With assistance from Grant Smith To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net, Susan Warren, Steven Frank