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Oil halts rally as market weighs chance of output freeze
[SINGAPORE] Oil prices eased in Asia Tuesday as doubts emerged that Saudi Arabia and other major producers would reach an agreement to freeze output during a meeting next month.
Members of the Organisation of Petroleum Exporting Countries (Opec) as well as non-members are scheduled to meet informally in Algeria in September, and Saudi Arabia's oil minister Khalid al-Falih has hinted that discussions could include actions to stabilise prices.
His remarks last week sparked a price rally as they were widely seen as a suggestion that Opec could revive talks on trimming high output levels.
Prices continued their rise in New York Monday after Russian Energy Minister Alexander Novak said his country was working with Saudi Arabia to achieve oil market stability - suggesting a possible production freeze in cooperation with Opec.
But analysts said there were doubts an accord would be reached.
"Some doubt about a possible deal to freeze output could have set in," IG Markets Singapore analyst Bernard Aw told AFP.
Mr Aw recalled that a previous attempt to freeze output at January 2016 levels failed in April after Saudi Arabia said it wanted all producers, including Iran, to be part of the agreement.
Iran had refused, saying it needed to regain market share lost during years of Western economic sanctions over its nuclear ambitions. The sanctions were lifted in January.
"Investors are wondering: if Iran doesn't participate in any such discussions, would Saudi Arabia still be amenable?" Mr Aw said.
At around 0700 GMT, US benchmark West Texas Intermediate for delivery in September was down 36 US cents, or 0.79 per cent, to US$45.38 and Brent crude for October dropped 41 US cents, or 85 per cent, to US$47.94.
Nigerian Petroleum Minister of State Emmanuel Kachikwu in a Twitter post Monday also voiced doubts about output cuts by Opec.
"On oil production cuts by Opec, optimism on my part is quite sparse," he said. Opec member Nigeria is Africa's biggest oil exporter.
Oil prices had entered a "bear" market at the start of the month on oversupply concerns, falling more than 20 per cent and closing below US$40 a barrel for the first time since April.
Any agreement to curb production would help rebalance the crude oil market, where output has been running ahead of demand.
"The chances of a deal actually occurring at next month's Opec meeting are minimal," Angus Nicholson, a strategist at IG Markets, said in an email commentary.
"The Saudis are happy to commit to some sort of Opec-wide supply freeze deal so long as Iran is party to it. And Iran refuses to agree to any deal that will inhibit them from lifting their oil output to pre-sanctions levels."