Oil prices slip as hopes for a deal in Algiers fade

[September 27, 2016]  By Libby George and Swetha Gopinath

LONDON (Reuters) - Crude oil futures fell on Tuesday as optimism faded for an output-limiting deal from an oil producer meeting in Algeria that has so far failed to yield any agreement to curb one of the worst supply gluts in history.

Saudi Arabia on Tuesday dashed hopes that OPEC oil producers could clinch a deal in Algeria this week after sources within the exporter group said differences between the kingdom and rival Iran remained too wide.

Brent crude futures slipped 85 cents to $46.50 a barrel by 1113 GMT, having closed up $1.46, or 3.2 percent, in the previous session.

U.S. West Texas Intermediate (WTI) crude fell 79 cents to $45.14 a barrel, after rising $1.45, or 3.3 percent, in the previous session.

"It's all about what's going on in Algiers really ... the prospect or no prospect of a supply deal," Olivier Jakob, oil analyst at Petromatrix, said. "There is no new fundamental development that is more important than Algiers."

Sources told Reuters last week that Saudi Arabia had offered to reduce its output if Iran agreed to freeze production. But Iran played down the chances of a deal, saying the meetings in Algiers were only advisory.

Russia's oil minister on Tuesday also said that the country would want to freeze oil output at current levels; Russia's oil output recently touched an all-time high of 11.75 million barrels per day (bpd).

Analysts also said that current high production in Russia and Saudi Arabia, combined with potential increases from Libya and Nigeria, made discussions in Algiers somewhat hollow.

"The announcements in Algeria contrast sharply with reality," analysts at Commerzbank said in a note, adding "all the signs point therefore to the comfortable supply situation continuing, that is to say to ongoing overproduction."

A pumpjack drills for oil in the Monterey Shale, California, April 29, 2013. REUTERS/Lucy Nicholson

U.S. investment bank Goldman Sachs on Tuesday cut its price forecast for WTI crude in the fourth quarter to $43 a barrel, from a $45-$50 range, saying that it expects global supply to exceed demand by 400,000 barrels per day (bpd) in the quarter.

Aside from OPEC, a strong U.S. dollar, which makes commodities like crude oil more expensive for holders of other currencies also pressured oil prices.

Traders were also watching for U.S. oil stock data due later on Tuesday from the American Petroleum Institute (API).

U.S. commercial crude oil stocks likely rose by an average of 2.8 million barrels to 507.4 million barrels in the week to Sept. 23, reversing three weeks of unexpected drawdowns, a Reuters poll of seven analysts showed.

(Additional reporting by Keith Wallis, editing by Louise Heavens and Jane Merriman)

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