Commodities: Saudi Arabia does not expect agreement in Algiers, crude futures drop

Oil futures slumped on Friday, following reports that Saudi Arabia did not expect an agreement to freeze oil output to be reached when producers met in Algiers over the following week.

Front month West Texas Intermediate crude oil futures dropped 3.97% to end the day at $44.48 per barrel on NYMEX.

Reports earlier in the day that Saudi Arabia had offered to cut production if Iran froze its own, then at approximately 3.6m barrels a day, had pushed WTI futures as high as $46.55.

Saudi Arabia now anticipated that talks would continue in the run-up to the formal OPEC meeting due to be held on 30 November, Bloomberg reported citing a delegate familiar with its policy.

The Kingdom had pumped a record 10.7m barrels of oil out of the ground in August, 490,000 b/d more than in January.

In parallel, Iran´s production had rcovered to 3.62m b/d in August, roughly 820,000 b/d more than before some sanctions against it were lifted.

Significantly, Iraq was reportedly set to defend production for itself of 4.75m b/d to 5.0m b/d, Bloomberg said.

Other energy futures were also lower on Friday, with October 2016 NYMEX heating oil losing 3.23% to $1.4073 a gallon and similarly-dated gasoline futures losing 1.78% to $1.3769.

"Our base case assumption is no freeze; yet, members are likely to make statements highlighting that they are closely watching market developments and will host a subsequent exceptional meeting if deemed necessary. We believe that any agreement in Algiers, or in the coming weeks, will depend on prices and will have little physical supply effect.

"Thus, we recommend paying less attention to Algiers and more attention to a naturally tightening oil market balance that precludes the group from having to make any difficult decisions," analysts at Barclays said in a research report sent to clients on 23 September.

Meanwhile, trading in the metals space was subdued, with gold and silver futures drifting just 0.2% lower on COMEX.

December 2016 COMEX copper was up 0.3% to $2.2010 per pound by the end of trading.

Over in the agricultural commodities space, trading was also muted in the likes of corn and wheat, but December 2016 cocoa futures on ICE lost 2.33% to $2,852.00 per metric tonne while cotton futures erased 2.29% to $7.0 a pound.

The Bloomberg Commodity index ended the session lower by 1.39% at 84.32 points as the US dollar spot index gained 0.14% to 95.51.