Oil Retreats From 15-Month High Amid Questions on Russian Stance

Oil slipped from a 15-month high in New York amid uncertainty over whether Russia would join an OPEC deal to curb supply.

Crude fell as much as 1.4 percent. Russia’s biggest producer Rosneft PJSC said it won’t cut output, according to Reuters, after President Vladimir Putin said at a conference in Istanbul that his country is willing to join efforts by OPEC to stabilize the market through a production freeze or cut. Supply and demand will come back into balance earlier than expected if OPEC’s accord to trim output is implemented, the International Energy Agency said. Price declines accelerated as the dollar climbed, curbing the appeal of commodities.

Oil rose to the highest in more than a year on Monday after Saudi Arabia expressed optimism that Organization of Petroleum Exporting Countries would work out a deal and Russia voiced its support. An increase to $60 a barrel would probably trigger a jump in North American production while trimming global demand growth, IEA Executive Director Fatih Birol said Tuesday. U.S. output has already halted its decline as higher prices revive drilling.

“The Istanbul conference has the market on edge,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We have inconsistent statements from Putin and Rosneft, which the market’s trying to interpret. There are increasing signs that some action will be taken, but skepticism remains.”

Rosneft Skepticism

West Texas Intermediate oil for November delivery fell 21 cents, or 0.4 percent, to $51.14 a barrel at 10:23 a.m. on the New York Mercantile Exchange. Prices rose $1.54 to $51.35 on Monday, the highest close since July 2015. Total volume traded was 82 percent above the 100-day average.

Brent for December settlement slipped 21 cents to $52.93 a barrel on the London-based ICE Futures Europe exchange. The contract rose 2.3 percent to $53.14 on Monday, the highest close since Aug. 31, 2015. The global benchmark crude traded at a $1.33 premium to WTI for the same month.

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose as much as 0.5 percent. A weaker U.S. currency reduced the appeal of dollar-denominated raw materials as an investment.

Russian Doubts

Rosneft Chief Executive Officer Igor Sechin said he doubts some OPEC countries such as Iran, Saudi Arabia and Venezuela would cut output, Reuters reported Tuesday, citing an interview. Sechin’s comments don’t contradict President Putin’s stance, Kremlin spokesman Dmitry Peskov told reporters on a conference call. If OPEC and Russia are able to reach an agreement, Rosneft will “of course” comply, Rosneft spokesman Mikhail Leontyev said.

An increase in prices above $50 would make U.S. shale projects profitable, he said. Leonid Fedun, vice president of Russia’s second-largest producer, Lukoil PJSC, said the nation’s oil companies will unify behind their government if talks with OPEC result in an agreement.

OPEC pumped a record 33.64 million barrels of crude a day in September, the IEA said in a report Tuesday. Returning volumes from Libya, Nigeria and Iran suggest that “bigger cuts” would have to be made by others, notably Saudi Arabia, to meet the production ceiling agreed in Algiers last month.

There may be a higher probability of an agreement between Russia and Saudi Arabia to cut production, but the deal may prove self-defeating if the resulting increase in prices boosts supply from other producers, Goldman Sachs Group Inc.’s Jeff Currie said on Bloomberg TV.