SINGAPORE – Oil prices fell on Wednesday, taking a breather after a rally fueled by reports Saudi Arabia and Russia had agreed to freeze output ahead of a key producers’ meeting. Prices climbed to their highest levels this year on Tuesday, as reports the two oil majors had reached a consensus boosted expectations a wider deal will be forged at a meeting in Doha. Sunday’s talks will bring together OPEC members led by Saudi Arabia and non-OPEC producers, such as Russia, to discuss how to ease an oil glut that has depressed prices for nearly two years. Prices are still more than 60 percent below peaks of over US$100 a barrel in mid-2014, despite recovering from near 13-year lows in February. At around 0600 GMT on Wednesday, U.S. benchmark West Texas Intermediate for delivery in May was down 59 cents, or 1.40 percent, at US$41.58.
Brent crude for June delivery, a more global benchmark, was trading 52 cents, or 1.16 percent, lower at US$44.17 a barrel. Prices gained on Monday and Tuesday, after surging more than eight percent the previous week. Tuesday’s rally in particular was driven by “optimism that Saudi Arabia and Russia have formed consensus toward an output freeze,” said Margaret Yang, an analyst with CMC Markets in Singapore. “This has greatly increased the certainty in the upcoming freeze meeting this Sunday, regardless of Iran’s attitude,” she said. “However, as a lot of optimism has been priced-in ahead of the meeting, traders shall remain cautious to the possible ‘sell on news’ next week.” Iran has said it will not join freeze calls as it is still ramping up production following the lifting of nuclear-linked sanctions in January. Yang said traders are also eyeing official data on U.S. commercial crude inventories, which will be released later on Wednesday, to gauge demand in the world’s top oil consuming nation. U.S. inventories showed a surprise fall in last week’s U.S. Department of Energy report. The market is looking to see if this is sustainable.