Crude oil prices dropped to a low of 50 months ahead of the meeting of the Organization of Petroleum Exporting Countries.
OPEC Gulf oil producers are not going to propose a cut in the output on Thursday, which reduces the likelihood of joint action by OPEC to prop the prices up after sinking by a third from June.
Reuters quoted Saudi Arabian Oil Minister Ali al-Naimi as having said in reference to the Gulf Cooperation Council, “The GCC reached a consensus. We are very confident that OPEC will have a unified position.”
Naimi added, “The power of convincing will prevail tomorrow. I am confident that OPEC is capable of taking a very unified position.”
Brent crude was trading at $77.60 per barrel, down by 73 cents.
OPEC members are scheduled to meet on Thursday, and it is then that it will be determined whether the production should be reined in to halt the five-month slide of oil.
University of Notre Dame finance professor and principal in energy practice, Gianna Bern was quoted by USA Today as having said, “Unless we see a meaningful cut out of OPEC, crude oil prices can continue to slide. Prices south of $70 per barrel are certainly plausible.”
The OPEC meeting is going to be one of its most important in the recent years with oil having dropped to below $78 per barrel because of the US shale boom and slow economic growth in Europe and China.
Cutting the output unilaterally might effectively mean a further loss of market share to the North American shale oil producers.
If OPEC decides against cutting and rolling over the existing levels of output, there will be a price war that Gulf producers and the Saudis might withstand because of their large reserves for foreign exchange. However, member such as Iran and Venezuela will find it more difficult.
To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com