Iran has knocked on the head any attempt to freeze OPEC oil production at an unofficial meeting of the producer group in Algiers tonight, our time.
Iran rejected the Saudi led attempt to try and steady global oil markets after more than two years of falls.
The news send global oil prices down by 2% to 4%.
In New York, November West Texas Intermediate crude lost $US1.26, or 2.7%, to settle at $US44.67 a barrel. That was after a 3.3% surge on Monday that now looks like yet another example of trader over optimism.
Brent crude sold off and fell $US1.39 or 2.9% to $US45.96 a barrel.
The news had little impact on sharemarkets – Europe fell because of continuing gloom over banks, led by the struggling Deutsche Bank.
And US markets rose strongly because of the perception that Hiliary Clinton won Monday night’s first presidential debate and encouraging news on US consumer confidence overnight.
Speaking before tonight’s meeting, Bijan Namdar Zanganeh, Tehran’s energy minister, said his country was not willing to freeze output until it had regained more than 4 million barrels a day of production.
That’s end of story so far as tonight’s meeting is concerned and it wouldn’t surprise if oil prices again test the $US40 a barrel level in the next few weeks.
The Iran rejection is a big blow to the Saudis. Only this week, the Financial Times reported that the country’s government had decreed a 20% cut to both minister’s salaries and bonuses for the country’s public service employees.
The Saudis are facing a budget deficit of close to $US100 billion as a result of the slide in oil prices since June 2014.
Iran has again made clear that it is not interested in capping its output until it reaches pre-sanctions markets share of 13% of Opec output.
Based on the cartel’s current production, that equates to around 4.2 million barrels a day, or about 600,000 b/d more than Iran currently claims to be pumping.
“At current levels we are not ready to freeze,” Mr Zanganeh said, according to media reports. “It is not on our agenda to reach an agreement in these two days.”
The Saudis seemed to read the writing on the wall earlier in the day and played down the importance of the meeting (Iran did that as well, but its comments carry more weight in this context).
Both countries said the Algiers meeting and other producers such as Russia, was only “consultative,” reinforcing views that major oil nations will walk away from the negotiations without agreement.
The Saudis say the meeting is aimed at building a consensus for an agreement later in the year (Presumably at the December OPEC meeting).
