Oil retreats as OPEC split imperils deal with deadline looming

Oil retreated below $47 in New York after OPEC officials failed Monday to work out a compromise on a deal to cut production and boost crude prices.

Futures lost as much as 2.3 percent. A 10-hour technical meeting focusing on how to divide cuts failed to resolve differences, with Iran still aiming to produce roughly 7 percent more than a level proposed by Saudi Arabia. Prices on Monday rallied 2.2 percent after Iraq’s oil minister said he was optimistic a deal would be reached. He reiterated the confidence on Tuesday. Goldman Sachs Group Inc. said the market is pricing in a 30 percent chance of a deal.

An OPEC deal could push prices up about $5 a barrel, according to Morgan Stanley, but 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 a push by the Organization of Petroleum Exporting Countries to cut production for the first time in eight years, changed his tone on Sunday, saying producers don’t necessarily need to curb output.

“There is some disappointment that no deal has been reached so far,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said by e-mail. “The issues regarding Iran and Iraq remain almost the same as a few weeks ago.” West Texas Intermediate for January delivery lost as much as $1.06 to $46.02 a barrel on New York Mercantile Exchange and was at $46.09 at 12:15 p.m. in London. Prices Monday rose $1.02 to $47.08 a barrel.

10-hour meeting

Brent for January settlement, which expires Wednesday, lost as much as $1.07, or 2.2 percent, to $47.17 a barrel on the London-based ICE Futures Europe exchange. The contract advanced 2.1 percent to $48.24 a barrel Monday. The global benchmark traded at a $1.23 premium to WTI for the same month. The more-active February futures were down 64 cents at $48.57 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 increases — 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.

A pact proposed Monday would trim output by 1.2 million 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, according to two delegates with knowledge of the talks. That is 7.2 percent higher than Saudi Arabia’s counter-proposal of 3.707 million barrels a day.

As OPEC tries to resolve its own differences, the group is also asking other big producers including Russia to reduce output by as much as 600,000 barrels a day. Russian resistance to reducing supply was a factor that forced the cancellation of planned discussions on Monday with non-OPEC suppliers.