NEW YORK CITY – Oil prices turned negative in volatile trade on Tuesday on worries that Iran and Iraq were not ready to agree on an OPEC output freeze.
According to a Reuters report, this downturn came just after prices earlier rose to the highest level this month on reports cartel members had overcome their internal disputes.
Analysts said the market will remain sensitive to comments from officials attending a technical meeting of the Organization of the Petroleum Exporting Countries (OPEC), which was trying to hammer out the details of an agreement before the formal meeting on Nov. 30.
Brent futures were down 41 cents at $48.49/bbl, while US crude fell 77 cents to $47.47/bbl. Brent came within four cents of $50 earlier in the session, its highest since Oct. 28.
Prices slumped after OPEC sources said agreement to a 4.0 to 4.5% output cut by all 14 members aside from Libya and Nigeria would still hinge next week on the backing of Iran and Iraq.
OPEC is trying to bring its members and non-OPEC producer Russia to agree on a coordinated cut to prop up the market, beset by a two-year glut in supplies, by bringing production into line with consumption. It said at the end of September it aimed to cut production to between 32.5 MMb/d and 33 MMb/d, compared with its recent record output of around 33.8 MM b/d.
While a ceiling for overall OPEC production may be agreed by Nov. 30, it is unclear whether clear quotas per member state would be set. Some countries, such as Nigeria, Iraq, Libya and Iran, argue they should be exempt because their output has been hit by conflict or sanctions.
US commercial crude oil inventories were forecast to have risen for a fourth consecutive week, gaining 700,000 bbl last week.