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Oil slips below $47 as hopes for producer action wane

A gas flare on an oil production platform is seen alongside an Iranian flag in the Gulf July 25, 2005. REUTERS/Raheb Homavandi/File Photo

LONDON—Oil slipped below $47 a barrel on Tuesday, falling further from the previous session's one-week high on receding hopes for imminent action to tackle a global supply glut.

Saudi Arabia and Russia agreed on Monday to cooperate in world oil markets, prompting Brent to jump almost 5 percent only for it to pare gains after Saudi Energy Minister Khalid al-Falih said there was no need to freeze output for now.

Brent crude for November was down $1.20 at $46.43 a barrel by 1352 GMT. U.S. crude for October, which did not settle on Monday due to the Labor Day holiday, was at $44.02, down 42 cents from Friday's close.

While the Saudi minister played down the prospect of imminent action, his Russian counterpart Alexander Novak said he was open to ideas on what cut-off period to use if countries chose to freeze output and said even production cuts could be considered.

"Differences still remain and will reinforce already heightened levels of scepticism that supply will soon be restrained," said Stephen Brennock of oil broker PVM.

Oil prices are half their level of mid-2014, hurting producing nations' income. OPEC and Russia tried earlier this year to curb the glut by seeking an output freeze, but the deal collapsed in April due to tension between Saudi Arabia and Iran.

The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria on Sept. 26-28. Others in the market are sceptical a deal will happen.

"The two nations' cooperation is understandable," said Kaname Gokon, a strategist with Okato Shoji Co Ltd.

"But when oil output is reduced, other producers would receive the benefit. There is still a question whether they can cut production for a sustainable period."

Iran, which is raising exports after the lifting of Western sanctions in January, refused to participate in the earlier effort to freeze output. Saudi Arabia insisted all producers take part, prompting the collapse of the talks.

By some measures, Iran is pumping at its pre-sanctions rate. OPEC and industry sources have said Tehran now appears to be more willing to reach an understanding with other producers.

OPEC Secretary-General Mohammed Barkindo met Iranian Oil Minister Bijan Zanganeh in Tehran on Tuesday. Zanganeh, after the meeting, voiced support for steps to boost prices, without specifying whether Iran would join such an effort.