NEW YORK: Oil fell about three per cent on Tuesday after Saudi Arabia and Iran dashed market hopes that the two major OPEC producers would find a compromise this week at meeting in Algiers to help ease a global glut of crude.
Saudi Energy Minister Khalid al-Falih told reporters in the Algerian capital, where OPEC and other oil producers gathered for the Sep 26-28 International Energy Forum, he did not expect an agreement to come out of the consultations on the last day of the meet.
He also said he did not think there was a need to significantly adjust or cut supply and that Iran, Libya and Nigeria should be allowed to produce at maximum levels seen in recent history.
"If you were looking for something dangerous from this meeting, this was it," said Jim Williams, analyst at WTRG Economics in London, Arkansas. "Instead of cutting, they're telling everybody to substantially increase supply."
Crude oil futures ended the session giving back most of what they gained the previous day.
Brent crude settled down US$1.38, or 2.9 per cent, at US$45.97 a barrel. US West Texas Intermediate (WTI) crude dropped US$1.26, or 2.7 per cent, to US$44.67.
In post-settlement trade, the market pared some losses after trade group The American Petroleum Institute reported a surprise draw of 752,000 barrels last week, versus analysts' forecasts of a build of three million barrels.
The US government will report official inventory data on Wednesday, showing if stocks indeed fell unexpectedly for a fourth straight week.
Oil prices have slid to less than half their 2014 highs, pushing the Organisation of the Petroleum Exporting Countries and other producers to seek a market rebalancing that would lift the oil revenues they rely on for their national budgets.
The Algiers talks were OPEC's second attempt at an output agreement after a failed round in Qatar in April.
Earlier in the day, Iran, trying to recapture oil exports lost to sanctions, rejected a Saudi offer to limit its output in exchange for reduced supply by Riyadh.
Like his Saudi counterpart, Iranian Oil Minister Bijan Zanganeh said the Algiers talks "is not the time for decision-making", deferring the possibility of any agreement to OPEC's formal policy meeting set for Nov 30 in Vienna.
OPEC member Iraq said it has based its 2017 budget on the assumption it exports 3.75 million barrels per day at US$42 a barrel.
Goldman Sachs cut its price forecast for WTI in the fourth quarter to US$43, from an earlier US$45-US$50 range, saying it expects supply to exceed demand by 400,000 bpd