Oil Declines From 3-Month High on Doubts About Output Meeting

Thummel: Oil Could Reach $50 By End of 2016
  • Meeting on oil production freeze said to be unlikely March 20
  • Euro climbs as Draghi says he sees no need for more rate cuts

Oil slipped from a three-month high amid uncertainty about when a meeting between Saudi Arabia, Russia and other producers to freeze output will occur as Iran seeks to rebuild its exports.

Futures in New York fell 1.2 percent after Reuters reported that a meeting is unlikely on March 20. The time and date of a meeting among major producers remains uncertain, Russian Energy Minister Alexander Novak said Wednesday, according to a report from Interfax. Prices briefly rose after the European Central Bank cut all its interest rates and expanded its monthly bond purchases.

"Iran is not committing itself to production cuts and that’s helping push the market lower," said Michael Hiley, head of OTC energy trading at New York-based LPS Partners. "The market’s been hoping that there will be some kind of deal being reached between OPEC and non-OPEC countries."

U.S. benchmark oil has erased this year’s losses as demand rose and U.S. production shows signs of declining. Average motor-fuel consumption the past four weeks was the highest since September, according to the Energy Information Administration. U.S. oil stockpiles, meanwhile, grew to the highest level since 1930.

West Texas Intermediate for April delivery fell 45 cents to $37.84 a barrel on the New York Mercantile Exchange. The contract settled at $38.29 on Wednesday, the highest close since Dec. 4. Volume of all futures was 40 percent above the 100-day average.

Fuel Demand

Brent for May settlement lost $1.02 to $40.05 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of 65 cents to WTI for May.

Iran has yet to say whether it would participate in a potential pact to freeze production, Reuters reported, citing unidentified people with knowledge of the matter. Saudi Arabia, Russia, Qatar and Venezuela agreed on Feb. 16 in Doha that they would freeze output if other producers followed suit in an effort to tackle the oversupply.

"The message from Iran has been loud and clear from the beginning that they would not reduce their output," said Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy. "And they are not prepared to freeze output either."

A meeting of Latin American oil producers originally scheduled to take place in Quito, Ecuador, on Friday has been postponed until late March or early April, government news agency Andes reported, citing Oil Minister Carlos Pareja. The gathering was delayed because of scheduling difficulties, according to the report. Pareja said Wednesday that he was seeking regional consensus to cut or freeze oil output.

The ECB cut the rate on cash parked overnight by banks by 10 basis points to minus 0.4 percent, and its benchmark rate to zero.

U.S. gasoline demand averaged 9.33 million barrels a day during the past four weeks, according to an EIA report Wednesday. Supplies of the fuel fell to 250.5 million. Nationwide crude inventories rose by 3.9 million barrels to 521.9 million last week. Output remains near the lowest level since November 2014.

Nigerian shipments, oil-price impacts:

  • Nigeria will export about 1.87 million barrels a day in April, the lowest since March 2014, according to loading programs obtained by Bloomberg and estimated shipments from the Bonga field, which hasn’t released its program yet.
  • Halliburton Co. told workers it’s suspending salary increases and eliminating some management bonuses to weather the market downturn.
  • Chesapeake Energy Corp. is weighing a sale of holdings in Oklahoma as the company unloads assets to pay down debt.
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