Brent Oil Drops Before OPEC Meeting, Iran Nuclear Talks 

Brent crude dropped for a second day as investors weighed the possibility that OPEC will reduce output next week, or that talks over Iran’s nuclear program could result in an agreement. West Texas Intermediate was little changed in New York.

Futures lost as much as 0.6 percent in London. Venezuela, one of 12 members of the Organization of Petroleum Exporting Countries, met with Russia to discuss ways to support oil prices, the foreign ministry in Caracas said yesterday. Iranians are expressing more optimism than their U.S. and European counterparts as negotiations resume over the Islamic Republic’s disputed nuclear program, according to officials from both sides of the talks.

Oil has slumped into a bear market as the U.S. pumps at the fastest pace in more than three decades and growth in demand slows. Japan, the world’s third-biggest consumer, slid into a recession in the third quarter. OPEC, responsible for about 40 percent of global supply, is set to gather to discuss output Nov. 27 in Vienna.

“We should see activity begin to slow and the market becoming more range bound as we await news from the OPEC meeting and also the Iran nuclear negotiations,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said by e-mail. “Until we see some action being taken to reduce the current overhang of supply, the upside remains limited.”

Defending Prices

Brent for January settlement dropped as much as 46 cents to $78.85 a barrel on the London-based ICE Futures Europe exchange and was at $79.05 at 1:15 p.m. local time. The volume of all contracts traded was about 19 percent below the 100-day average for the time of day. Prices have decreased 28 percent this year.

WTI for December delivery fell as 4 cents to $75.60 a barrel in electronic trading on the New York Mercantile Exchange. The more-active January future was unchanged at $75.66. The U.S. benchmark crude was at a discount of $3.34 to Brent on ICE for the same month.

Rafael Ramirez, Venezuela’s foreign minister and representative to OPEC, and Russia’s Energy Minister Alexander Novak discussed “coordinating action” to defend the oil market, the foreign ministry said in a statement. Iranian Oil Minister Bijan Namdar Zanganeh is preparing to visit the United Arab Emirates this week, according to Shana, the Tehran-based oil ministry’s news service.

Nuclear Talks

A “large” production cut by OPEC to prop up crude prices isn’t in the group’s interest because it’s likely to bolster the expansion of U.S. shale oil, according to Goldman Sachs Group Inc. While the recent slide in prices increases the chances of a reduction, trimming output by more than 500,000 barrels a day would mean further cuts are needed starting 2016 as higher prices prompt more U.S. drilling, the bank said in a note yesterday.

Talks in Vienna have resumed today between Iran and the U.S., along with Russia, Germany, the U.K. and France, to try and reach an agreement on the Islamic Republic curbing its nuclear program in return for relief from economic sanctions.

U.S. officials, who spoke on condition of anonymity about the closed-door talks, said gaps remain even after some progress stemming from last week’s meeting between Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif in Oman. It could be possible to get an agreement sealed on Nov. 24, but only if tough decisions are taken by Iran’s leaders, one of the officials said.

In the U.S., the world’s largest oil consumer, crude stockpiles probably declined by 1 million barrels to 377.5 million last week, according to the median estimate in a Bloomberg News survey of seven analysts before an Energy Information Administration report tomorrow. That would be the lowest level in five weeks.

Source: businessweek – WTI Rises Before OPEC Meeting as Dollar Weakens

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