Prices of oil dropped on Monday amid expectations that the Organization of Petroleum Exporting Countries would not reduce production enough to lower the global oil glut.
Fund managers report that prices of oil might reduce to $60 per barrel if the cartel does not make significant cuts to reduce the oversupply.
According to The Wall Street Journal, January delivery light sweet oil dropped 0.8% or 61 cents to $75.90 per barrel on the New York Mercantile Exchange.
The global benchmark, Brent, dropped 0.8% or 60 cents to $79.76 per barrel on the ICE Futures of Europe.
In the recent months, oil prices have declined on concerns about the ample supply, and traders are watching the OPEC closely before its November 27 meeting. The cartel, controlling around one-third of the global output, is producing above its 30 million barrels per day collective production quota.
According to analysts, OPEC will have to reduce production by around one million barrels a day to bring the global oil supplies in line with the demand.
OPEC members, including Saudi Arabia, which is the top exporter, have showed signs that they are unlikely to make any large cut.
Tudor Pickering Holt & Co. analysts said in a note, “No action would be met with a yawn, but would ultimately keep downward pressure on oil prices.”
After failing to reach an agreement for the Monday deadline, Iran and OPEC members are extending nuclear negotiations until the close of June 2015. This means that in the coming months, the sanctions on the Iranian oil exports, keeping hundreds of thousands of oil barrels of the global market, might be lifted.
CNBC quoted Oliver Jakob, analyst at Petromatrix oil as having said, “The focus all this week is going to be on Vienna, starting today with the continuation of the negotiations on Iran. This will also have an influence over what happens in Vienna in the second part of the week with the OPEC meeting.”
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