Oil Falls From 4-Month High as Speculation Swirls on Doha Talks

  • OPEC, non-OPEC producers to discuss output freeze on April 17
  • U.S. supplies at 536.5 million barrels, most since 1930: EIA

Will Output Freeze Make for Bullish Oil?

Oil fell from a four-month high as speculation swirled over the likely outcome of a meeting by major suppliers in Doha.

Futures dropped 1 percent in New York. Prices swung amid contradictory reports on whether Iranian Oil Minister Bijan Namdar Zanganeh will attend the April 17 talks in the Qatari capital. U.S. crude inventories rose to the highest level in more than 80 years last week, while production fell below 9 million barrels a day, an Energy Information Administration report showed Wednesday.

"The market will remain volatile until we get an announcement Sunday or Monday," said Brian Kessens, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $12 billion in energy assets. "The results of the Doha meeting will probably be mostly symbolic, since they are pumping near capacity

Oil has rebounded after falling to the lowest level in more than 12 years in February amid signs that a global glut will ease as U.S. output declines. Prices climbed to the highest level in more than four months Tuesday as Saudi Arabia and Russia were seen agreeing on a production cap at the Doha meeting.

Meeting Attendance

West Texas Intermediate for May delivery fell 41 cents to settle at $41.76 a barrel on the New York Mercantile Exchange. Prices rose 4.5 percent to $42.17 on Tuesday, the highest close since Nov. 25. Total volume traded was 50 percent above the 100-day average.

Brent for June settlement dropped 51 cents, or 1.1 percent, to $44.18 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $1.17 premium to WTI for June delivery.

Iranian Oil Minister Bijan Namdar Zanganeh hasn’t communicated a definitive decision on whether he will attend the Doha talks, Akbar Nematollahi, director general of public relations at the oil ministry, said by phone. Prices dropped earlier when Seda reporter Reza Zandi said on Twitter that Zanganeh would send a representative.

Kremlin press secretary Dmitry Peskov said he still sees hope for a deal to cap production regardless of Iran’s position, following a conversation between Russian Energy Minister Alexander Novak and his Saudi counterpart.

Ample Supplies

"Yesterday, the oil market was taking heart from the fact that Saudi Arabia and Russia were in talks ahead of the producer summit,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “Today, the Saudis and Iranians are throwing a spanner in the works. There is still a lot of oil, freeze or no freeze.”

U.S. crude stockpiles climbed 6.63 million barrels to 536.5 million barrels last week, the highest level since 1930, EIA data show. The gain was more than six times what was projected by analysts surveyed by Bloomberg. Supplies at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, declined by 1.77 million barrels last week.

U.S. crude production fell to 8.977 million barrels a day last week, the EIA data show. It was the first decline bellow 9 million barrels in 18 months. Output, which has slipped 11 of the last 12 weeks, is down 6.6 percent from a peak of 9.61 million barrels reached last June. Active oil rigs in the U.S. fell to 354 last week, the fewest since November 2009, according to Baker Hughes Inc. 

"Production continues to slowly decline," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "The declines should continue here given the drop in the rig count. "

Refineries trimmed operating rates by 2.2 percentage points to 89.2 percent of capacity. U.S. refiners typically increase utilization in April as they finish maintenance before the summer peak driving season.

Gasoline stockpiles fell by 4.24 million barrels last week. Supplies of distillate fuel, a category that includes diesel and heating oil, rose 505,000 barrels.

"When refineries finish coming out of maintenance, gasoline supplies should increase while crude supplies will start to come down," Kessens said.

Other News:

  • OPEC said in a monthly report that it may deepen cuts to its forecast for global oil demand growth due to slowing economic expansion in emerging markets, warmer weather and the removal of fuel subsidies.
  • Schlumberger Ltd. will reduce activity in Venezuela after the world’s largest oil services provider failed to collect enough payments from the national oil company.
  • China’s crude imports climbed to a record in the first quarter as higher margins encouraged refiners to boost purchases.
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