Oil fell to a two-week low as an OPEC deal to curb output appeared in jeopardy after Iran and Saudi Arabia failed to bridge differences.
Futures tumbled 3.9% after Iranian Oil Minister Bijan Namdar Zanganeh told reporters in Vienna his nation won’t reduce production. A 10-hour technical meeting focusing on how to share the burden of cuts failed to resolve differences. Saudi Arabia is ready to reject an agreement unless all OPEC members, excluding Libya and Nigeria, participate, said people familiar with the kingdom’s current position at the talks.
“This is going to go right down to the wire,” Mike Wittner, head of oil-market research at Societe Generale SA in New York, said by telephone. “The Saudis have been remarkably consistent in what they expect from the Iranians over the last two months.”
Goldman Sachs Group Inc. said the market is pricing in a 30% chance of a deal. While an accord could push prices up about $5 a barrel, according to Morgan Stanley, a failure could drive it down into the $20s, said Amrita Sen, chief oil analyst at Energy Aspects Ltd. Saudi Arabia’s Energy Minister Khalid Al-Falih, who has led the push for OPEC to cut production for the first time in eight years, changed his tone on Sunday, saying a deal might not be needed.
West Texas Intermediate for January delivery dropped $1.85 to $45.23 a barrel on the New York Mercantile Exchange. It’s the lowest settlement since Nov. 14. Total volume traded was about 17% above the 100-day average at 2:41 a.m.
Brent for January settlement, which expires Wednesday, fell $1.86, or 3.9%, to $46.38 a barrel on the London-based ICE Futures Europe exchange. It was also the lowest close since Nov. 14. The global benchmark ended the session at a $1.15 premium to WTI for the same month. The more-active February futures slipped $1.89 to $47.32 a barrel.
The options market is also looking increasingly bearish. The so-called put-call skew — a measure of the difference in demand for options used to protect against price drops compared with those that insure the buyer against gains — closed on Monday with the most bearish reading in five months for Brent.
Brent may swing $6 a barrel on Wednesday, based on implied volatility for options contracts, Goldman analysts including Jeff Currie said in a report.