Fueling Strategy: Please keep tanks topped tonight, Wednesday AM wholesale prices will jump UP 4 cents – Be Safe

NYMEX Crude $ 44.67 DN $1.2600
NY Harbor ULSD $1.4099 DN $0.0391
NYMEX Gasoline $1.3937 DN $0.0087

NEWS
Oil futures dropped by nearly 3% Tuesday after both Iran and Saudi Arabia played down expectations for a deal to freeze or cut crude production at the closely watched informal OPEC meeting on Wednesday. Both countries implied that the meeting between members of the Organization of the Petroleum Exporting Countries and other heavyweight producers such as Russia, will be “consultative,” reinforcing views that major oil nations will walk away from the negotiations without an agreement.

November West Texas Intermediate crude fell by $1.26, or 2.7%, to settle at $44.67 a barrel on the New York Mercantile Exchange, following a gain of 3.3% on Monday. November Brent crude traded on London’s ICE Futures Europe fell $1.38, or 2.9%, to $45.97 a barrel.

Arriving at the three-day oil conference in Algiers on Monday, Iranian officials reiterated their vow to pump output higher, undercutting expectations the country would agree to an output pact. Saudi Arabia Energy Minister Khalid al-Falih reiterated Iran’s comments, stressing the meeting’s purpose as “consultative” only. Sources within OPEC said the differences between cartel kingpin Saudi Arabia and rival Iran remain too wide, according to Reuters. “This is short-term bearish, eliminating optimism of an agreement at this meeting,” said James Williams, energy economist at WTRG Economics.

But by the time OPEC’s scheduled Nov. 30 meeting rolls around, Iran should be closer to its pre-sanction output level of 4 million barrels a day, said Williams. That’s the level Iran said it plans to reach before even considering a cap on production. So “between now and November, we may be in for a sustained volatility and wild ride for prices,” Williams said. Analysts say the longstanding political rivalry between Saudi Arabia and Iran remains a core hindrance to any potential deal at Algeria. “There is really no hope of any agreement when Iran and Saudi Arabia don’t agree,” said Alan Oster, chief economist at National Australia Bank.

Saudi Arabia has stated it would support a production freeze, only if all players are committed to the plan and if Iran caps its future production at its current daily output of 3.6 million barrels, according to people familiar with the kingdom’s proposal. Oil prices failed to get a boost even after The Wall Street Journal, citing people familiar with the proposal, reported that OPEC would discuss cutting 350 million barrels of output over 1 year, equal to around 1 million barrels a day.

“Our expectation of this week’s gathering in Algiers remains unchanged, with no expectation of any deal that would have a meaningful impact on supply,” said Robbie Fraser, commodity analyst at Schneider Electric. Even if a deal were reached, oversupply in global oil markets would persist as countries like Nigeria and Venezuela are aggressively ramping up production to make up for losses they suffered in recent months due to internal strife. “Freezing output at current levels would do little to balance the market given that the majority of OPEC members are producing at or around their peak capacity,” said BMI Research, in a note.

Goldman Sachs, meanwhile, on Tuesday slashed its oil forecast for the rest of 2016, warning that supplies will continue to outstrip demand regardless of what happens in Algiers this week. The analysts, led by Damien Courvalin and Jeffrey Currie, lowered their WTI crude oil forecast for the fourth quarter to $43 a barrel from $50 previously.

“Once OPEC temporarily fades from the headlines, U.S. crude and product fundamentals should take center stage among market drivers,” Fraser said in a note. “While crude stocks have declined in recent weeks, distillates have once again become significantly oversupplied,” he said. “With refiners heading into traditional maintenance season, either oil prices or crack spreads will likely need to see some added weakness in order to rebalance the crude/crude product dynamic.”

A weekly U.S. crude stock report from the Energy Information Administration is due Wednesday. A survey by S&P Global Platts showed U.S. crude inventories rose 3.2 million barrels last week while gasoline stocks remained unchanged. The American Petroleum Institute will release separate data late Tuesday.