Crude Fades Amid Signals of Lackluster OPEC Deal to Cut Output

(Bloomberg) -- Crude dropped the most in almost two weeks amid signals that OPEC, Russia and other aligned oil producers won't curb output enough to erase a supply overhang.

Futures in New York declined 2.7 percent on Thursday. Saudi Arabian Oil Minister Khalid Al-Falih said in Vienna that he was not confident OPEC and allied oil producers will reach an agreement when the Organization of Petroleum Exporting Countries meets again with allies on Friday. A proposal for a combined 1 million barrel-a-day cut by OPEC and non-OPEC is being discussed.

“There continues to be uncertainty with what OPEC will do,” said Brian Kessens, who helps manage $16 billion at Tortoise in Leawood, Kansas. “Right now, it's a market that is assuming the worst.”

Oil's sell-off also gathered steam as equity markets tanked. The S&P 500 Energy Index fell 3 percent as of 3:16 p.m. in New York, with all but one member lower.

Traders are waiting for any signs of a formal deal announcement as producers convene in the Austrian capital. OPEC will meet again on Friday at 9 a.m. in Vienna and will then meet with non-OPEC allies, including Russia, at noon local time, according to delegates. Saudi Arabia and Russia “have a lot to lose” if there is no accord, Oman Oil Minister Mohammed Al Rumhy told reporters.

“People were really hoping to hear something closer to 1.3 million barrels a day and we haven't gotten an official announcement yet,” said Ashley Petersen, an oil analyst at Stratas Advisors LLC in New York. Given Saudi Arabia's “history of over-compliance, markets are a little bit preemptively disappointed.”

See Also: U.S. Become a Net Oil Exporter for the First Time in 75 Years

West Texas Intermediate for January delivery fell $1.40 to settle at $51.49 a barrel on the New York Mercantile Exchange. Total volume traded was about 46 percent above the 100-day average.

Brent for February settlement tumbled $1.50 to end the session at $60.06 a barrel on London's ICE Futures Europe exchange. The global benchmark crude was at an $8.36 premium to WTI for the same month.

Amid ongoing talks in Vienna this week, Trump tweeted on Wednesday saying the world “does not want to see, or need, higher oil prices.” Saudi Arabia may not be able to defy Trump's demand for lower prices, after the killing of Jamal Khashoggi unleashed a fusillade of criticism from American lawmakers, leaving the president as one of Crown Prince Mohammed bin Salman's few remaining allies in Washington.

Meanwhile, U.S. crude stockpiles fell for the first time since mid September, down 7.32 million barrels last week, as exports jumped to a record, according to data from the Energy Information Administration on Thursday. The U.S. has become a net oil exporter for the first time in 75 years.

--With assistance from Tsuyoshi Inajima and Alex Longley.

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers

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