Futures tumbled up to 4.8% after Iranian oil minister Bijan Namdar Zanganeh told reporters in Vienna his nation will not 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,” said Mike Wittner, head of oil market research at Société Générale in New York. “The Saudis have been remarkably consistent in what they expect from the Iranians over the last two months.”
Goldman Sachs said the market is pricing in a 30% chance of a deal. While Morgan Stanley says an accord could push prices up about $5 a barrel, a failure could drive it down to the $20s, said Amrita Sen, chief oil analyst at Energy Aspects.
Saudi Arabia 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 $1.76, or 3.7%, to $45.32 a barrel on the New York Mercantile Exchange. Futures hit $44.82, the lowest since November 18. Prices rose 2.2% yesterday. Total volume traded was about 20% over the 100-day average.
Brent Crude fell $1.75, or 3.6%, to $46.49 a barrel on the London-based ICE Futures Europe exchange.
“Unless there’s a material concession from Iran there’s no way Saudi Arabia is going to agree to reduce production,” said Stephen Schork, president of the Schork Group, a consulting company in Pennsylvania.
“If prices jumped above $50, US barrels would come back to the market. They would also lose market share to the Iranians and Russians in the Far East.”
A pact proposed yesterday would trim output by 1.2m barrels a day from October levels, though it remains unclear whether the idea has the support needed for approval, a delegate said.
Iran, Opec’s third-biggest producer, proposed that it freeze production at 3.975 million barrels a day.
That is 7.2% higher than Saudi Arabia’s counter-proposal of 3.707m barrels a day.