(Bloomberg) -- Oil’s rally has stalled as questions swirl on where Russia stands on extending OPEC’s output-reduction deal.
Futures fell as much as 1.2 percent in New York after rising above $59 a barrel last week. While all OPEC members support extending production cuts until the end of 2018, Russia hasn’t yet committed to the proposal, according to people familiar with the matter. If the outcome of OPEC’s meeting in Vienna on Thursday doesn’t meet expectations, prices could quickly drop further, according to Goldman Sachs Group Inc (NYSE:GS).
“The Russian angle is working its way into the conversation,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York, in a telephone interview. If the extension is less than nine months, “the market’s not going to be very happy.”
While oil surged earlier this month on signals the Organization of Petroleum Exporting Countries and its partners will extend supply curbs, doubts are now hanging over the market. Saudi Arabia Energy Minister Khalid Al-Falih said Tuesday that it’s too early to talk about the duration of a potential extension.
“Optimism has driven prices up quite a bit and now we’re seeing some cautiousness being priced in ahead of OPEC,” said Hans Van Cleef, senior energy economist at ABN Amro. “Although it’s pretty certain that the agreement will be extended, it’s more about the details and we know that Russia would prefer to wait a bit longer.”
West Texas Intermediate for January delivery slipped 19 cents to $57.92 a barrel at 9:49 a.m. on the New York Mercantile Exchange. Total volume traded was about 1 percent above the 100-day average.
Brent for January settlement dipped 36 cents to $63.48 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.55 to WTI.
Meanwhile, U.S. crude stockpiles probably dropped by 3.75 million barrels last week, according to the median estimate in a Bloomberg survey before an Energy Information Administration report on Wednesday. The industry-funded American Petroleum Institute’s report is scheduled to release its stockpile data on Tuesday.
Oil-market news:
- Citigroup Inc (NYSE:C). said OPEC may either defer its decision on output cuts to the first quarter of 2018 or agree on an extension shorter than nine months.
- Oil prices should remain range-bound at $50-$60 a barrel over the next two years, but there is upside risk from political tensions and winter weather that could push prices to $80, Societe Generale (PA:SOGN) SA analysts said in a note.
