Oil prices fell 2 percent on Tuesday, falling further from the previous session’s one-week high on receding hopes for an agreement between the world’s top two producers to freeze output to tackle a global supply glut.
Saudi Arabia and Russia agreed on Monday to cooperate in world oil markets, prompting Brent crude to jump almost 5 percent only for it to pare gains after Saudi Energy Minister Khalid al-Falih said there was no need to freeze output for now.
On Tuesday, Brent crude was trading 73 cents lower at $46.90 a barrel by 12:00 p.m. EDT (1600 GMT). U.S. crude for October, which did not settle on Monday due to the Labor Day holiday, was at $44.42, down 2 cents from Friday’s close.
While the Saudi minister played down the prospect of imminent action, his Russian counterpart Alexander Novak said he was open to ideas on what cut-off period to use if countries chose to freeze output and said even production cuts could be considered.
The Organization of the Petroleum Exporting Countries and non-OPEC producers, like Russia, will hold informal talks in Algeria on Sept. 26-28. Many in the market are skeptical a deal will happen.
“It seems like we’ve found a new trading range in the $40s now and the market is very sensitive to any stories about the possibility of a production freeze,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut.
On Tuesday, OPEC Secretary-General Mohammed Barkindo met Iranian Oil Minister Bijan Zanganeh in Tehran. After the meeting, Zanganeh said he would support any measure to stabilize crude prices at around $50-$60 a barrel.
Oil prices are half their level of mid-2014, hurting producing nations’ income. OPEC and Russia tried earlier this year to curb the glut by seeking an output freeze, but the deal collapsed in April due to tension between Saudi Arabia and Iran.