Oil prices took a breather in Asia today after sharp gains fuelled by reports of an agreement between Saudi Arabia and Russia on freezing output ahead of a key producers’ meeting.
Prices climbed to their highest levels this year yesterday, as reports Saudi Arabia and Russia had reached a consensus boosted the expectations of a wider deal during Sunday’s meeting in Doha.
The meeting will bring together OPEC members led by Saudi Arabia and non-OPEC producers, such as Russia, to discuss how to ease an oil glut that has depressed prices for nearly two years.
Prices are still more than 60 per cent below peaks of over $100 a barrel in mid-2014 despite recovering from near 13-year lows in February.
At around 0250 GMT today, US benchmark West Texas Intermediate for delivery in May was down 34 cents, or 0.81 per cent, at $41.83. Brent crude for June delivery, the European benchmark, was trading 19 cents, or 0.43 per cent, lower at $44.50 a barrel.
Prices were up on Monday and Tuesday after surging eight percent or more week-on-week last Friday.
Yesterday’s rally in particular was driven by “optimism that Saudi Arabia and Russia have formed consensus towards an output freeze”, said Margaret Yang, an analyst with CMC Markets in Singapore.
“This has greatly increased the certainty in the upcoming freeze meeting this Sunday, regardless of Iran’s attitude,” she said.
“However, as a lot of optimism has been priced-in ahead of the meeting, traders shall remain cautious to the possible ’sell on news’ next week.”
Iran production
Iran has said it will not join freeze calls as it is still ramping up production following the lifting of nuclear-linked sanctions in January.
Yang said traders are also eyeing official data on US commercial crude inventories, which will be released later today, to gauge demand in the world’s top oil consuming nation.