Investing.com - Oil prices were sharply lower during North America's session on Tuesday, erasing all of the prior day's strong gains as an agreement between Saudi Arabia and Russia to stabilize the market stopped short of delivering imminent action to tackle a supply glut.
On the ICE Futures Exchange in London, Brent oil for November delivery sank $1.07, or 2.25%, to trade at $46.56 a barrel by 9:35AM ET (13:35GMT).
Brent spiked by more than 5% on Monday to touch an intraday peak of $49.40 after Saudi Arabia and Russia pledged to work together to support the market.
But prices pared gains later in the session to end well off the highs as details of the agreement underwhelmed traders who had been hoping for a production freeze.
The world’s two largest oil producers said they will set up a working group to monitor the oil market and come up with recommendations to promote stability.
Saudi Arabian oil minister Khalid al-Falih and his Russian counterpart, Alexander Novak, will meet in Algeria later this month and in Vienna in November to discuss how to cooperate under the new agreement.
Dampening optimism, al-Falih said there was no need to freeze production at the moment. He added, however, that freezing output was one of the preferred possibilities.
The Organization of the Petroleum Exporting Countries, led by Saudi Arabia and other big Middle East crude exporters, will meet non-OPEC producers led by Russia at informal talks in Algeria between September 26 and 28 to discuss a freeze output.
Chances that the upcoming meeting in late September would yield any action to reduce the global glut appeared minimal, according to market experts.
Instead, most believe that oil producers will continue to monitor the market and possibly postpone freeze talks to the official OPEC meeting in Vienna on November 30.
An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran's refusal to take part of the initiative, underscoring the difficulty for political rivals to forge consensus.
Meanwhile, crude oil for October delivery on the New York Mercantile Exchange was at $44.16 a barrel, down 30 cents, or 0.7%, from its last settlement on Friday.
Nymex prices surged more than $2.00, or 5%, on Monday to hit a daily peak of $46.53. U.S. crude did not settle on Monday due to the U.S. Labor Day holiday.