Crude Oil - Opec Meeting

Petroleum markets brace for OPEC meeting –

The petroleum markets are nervously awaiting tomorrow’s OPEC meeting in Abu Dhabi. The market seems to be roughly split on the question of whether OPEC will raise its production. The reality is that Saudi Arabia is the only country with any significant excess capacity, which means OPEC’s decision as usual hinges mostly on what Saudi Arabia wants to do. The Saudi oil minister said last Friday that, “There is absolutely ample supply. The price movement has nothing to do with the fundamentals of the market.” That suggested that Saudi Arabia is not in favor of raising production since according to the Saudi oil minister’s view, supply is not the problem. OPEC as a whole is also concerned that the global economy may be on the brink of a downturn, which would mean that a sudden glut of oil could emerge if OPEC were to increase production at the same time as the global economy and oil demand turn lower. Since posting a record h igh of $99.29 two weeks ago, crude oil futures have sold off by a total of about $12 per barrel.

The market has moved lower on technical long liquidation pressure and increased concern about lower oil demand from high oil prices and weaker global economic growth. Oil prices also moved lower on the possibility that OPEC tomorrow might decide to raise production a notch. OPEC at their last meeting in September decided to increase their official production quota by 500,000 bpd. In fact, OPEC production (excluding Iraq) rose by +305,000 bpd in October from the previous month, with 100,000 bpd of that increase coming from Saudi Arabia. Since OPEC has yet to fully implement their previously announced 500,000 bpd increase, OPEC members may believe it is premature to announce another hike.
Source - Bloomberg