Investing.com -- U.S. crude pared sharp gains on Tuesday, after investors expressed intense skepticism that a Saudi Arabian-Russian brokered deal aimed at freezing production at its current levels could be completed without the cooperation of Iran.
On the New York Mercantile Exchange, WTI crude for March delivery wavered between $28.71 and $31.45 a barrel before settling at $29.04, down 0.41 or 1.38% on the day. At session-highs, U.S. crude futures surged nearly 7% in overnight trading ahead of an emergency meeting, involving the two major producers, as well as Venezuela and Qatar. WTI crude, which has closed lower in 10 of the last 13 sessions, continues to hover near 13-year lows from last week when it traded at $26.05 a barrel.
On the Intercontinental Exchange, brent crude for April delivery traded in a broad range between $31.93 and $35.54 a barrel, before closing at $32.76, down 1.25 or 3.73% on the session. At one point on Tuesday, North Sea brent futures sprung to near three-week highs reached at the start of the month, following a four-day winning streak to cap January. Brent still settled at its lowest closing level in four sessions, following a late sell-off.
Both the international and U.S. benchmarks of crude are down more than 70% over the last 15 months since OPEC rattled global energy markets in November, 2014, with a strategic decision to leave its production ceiling above 30 million barrels per day. As a result oil markets have been awash in excessive supply, pushing crude prices to levels not seen since the early-2000s.
In Doha, the four producers agreed in principle on an accord to freeze output at its January levels, representing the first time OPEC and Non-OPEC states have reached a deal in 15 years. Last month, Saudi Arabia, the world's top exporter pumped 10.2 million barrels of crude per day, just below its June peak of 10.5 million bpd.
"The reason we agreed to a potential freeze of production is simple: it is the beginning of a process which we will assess in the next few months and decide if we need other steps to stabilize and improve the market," Saudi Arabia energy minister Ali al-Naimi told reporters on Tuesday.
"We don't want significant gyrations in prices, we don't want reduction in supply, we want to meet demand, we want a stable oil price," al-Naimi added. "We have to take a step at a time."
Any deal, however, is contingent on the approval of Persian Gulf neighbor Iran, which was notably absent from the meeting. On Monday, Iran began exporting crude oil to Europe for the first time in five years, nearly a month after a group of Western Powers eased long-term economic sanctions against the nation, paving the way for its return to global markets. Three Iranian tankers carrying 2 million barrels to French Oil and Gas company Total, and another 2 million to companies in Spain and Russia were headed for Europe, Iran deputy oil minister Rokneddin Javadi told the Shana News Agency. Iran also announced plans over the weekend to boost its production and exports by 1 million barrels per day in 2016.
While the four producers are scheduled to meet with Iran and Iraq on Wednesday in Tehran, Iranian officials are not expected to freeze production until it returns to pre-sanction levels.
In the U.S., crude stockpiles at the Cushing Oil Hub in Oklahoma, rose by 705,000 for the week ending on Feb. 12, according to global data provider Genscape, Inc. Inventories at Cushing, the main delivery point of Nymex oil, are approaching near 90% of full storage capacity.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.15% to an intraday high of 97.00. The index is still down approximately 2.8% since the Bank of Japan spooked foreign exchange markets worldwide last month with a surprising decision to push its short-term interest rates into negative territory.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.