Oil prices slip further as hopes for a deal in Algiers fade

Crude futures fell further on Tuesday as optimism faded for an output-limiting deal during an oil producer meeting in Algeria that so far has failed to yield any agreement to curb one of the worst supply gluts in history.

Saudi Arabia on Tuesday dashed hopes that OPEC oil producers could clinch a deal in Algeria this week as sources within the exporter group said the differences between the kingdom and rival Iran remained too wide.

Brent crude futures slipped 80 cents to $46.55 a barrel by 0851 GMT, having closed up $1.46, or 3.2 percent, in the previous session.

U.S. West Texas Intermediate (WTI) crude fell 68 cents to $45.25 a barrel, after rising $1.45, or 3.3 percent, in the previous session.

“It’s all about what’s going on in Algiers really … the prospect or no prospect of a supply deal,” said Olivier Jakob, oil analyst at Petromatrix. “There is no new fundamental development that is more important than Algiers.”

Sources told Reuters last week that Saudi Arabia had offered to reduce its output if Iran agreed to freeze production, but Iran downplayed the chances of a deal, saying the meetings in Algiers on the sidelines of the International Energy Forum this week were only advisory.

Russia’s oil minister on Tuesday also said that the country would want to freeze oil output at current levels; Russia’s oil output recently touched an all-time high of 11.75 million barrels per day (bpd).

A U.S. dollar, which makes commodities like crude oil more expensive for holders of other currencies, also hampered oil prices that had strengthened in the previous session.

Traders were also looking ahead to data on U.S. oil stocks due later on Tuesday from the American Petroleum Institute (API).

U.S. commercial crude oil stocks likely rose by an average of 2.8 million barrels to 507.4 million barrels in the week to Sept. 23, reversing three weeks of unexpected drawdowns, a Reuters poll of seven analysts showed.

Still, with so many factors lining up against the chances of a deal in Algiers, analysts said that any unexpected news could quickly reverse the direction of oil prices.

“With the market still unconvinced an agreement will be reached, any signs that OPEC will cap output could see prices surge higher,” ANZ said in a market report on Tuesday.