Crude oil is trading in the red this morning at 41.59 down by 26 cents while Brent oil dipped just 4 cents to 44.26. Oil traders have not taken advantage
Crude is dropping as the Organization of Petroleum Exporting Countries looks past a global glut to pump above its production target in an effort to defend market share. Oil prices fell slightly Tuesday as Saudi Arabia’s oil minister would not be drawn on the outcome of OPEC’s upcoming meeting on crude production levels.
“We will discuss… and then decide” on output, Saudi Arabia’s oil minister Ali al-Naimi told reporters on arrival in Vienna ahead of Friday’s meeting of the Organization of the Petroleum Exporting Countries in the Austrian capital.
The cartel is widely expected to maintain high output levels despite a global supply glut, with OPEC kingpin Saudi keen to hold onto market share in the face of strong competition from US shale oil production.
Crude prices are likely to stay sideways ahead of the OPEC meeting, where Iran is expected to announce plans to expand output. Iran, one of a dozen OPEC members, is expected to increase its oil exports after crippling Western sanctions are lifted under a deal reached with major world powers in July to curb its nuclear program. The sanctions have restricted Iranian oil shipments and analysts say their return to the market will further add to the crude oversupply.
Iran’s deputy foreign minister Abbas Araghchi said last week his country expects the deal to come into force in early January, when Tehran will have implemented its commitments. Oil prices have been in retreat from levels above $100 a barrel reached in mid-2014.
There is no way Saudi Arabia is going to agree to making production cuts, after working hard to bring the U.S. shale industry to its knees over the last year, and forcing its other large competitors like Russia to reduce exploration and development investment.
Seeking Alpha asks “What will have more of an impact on the price of oil will be the upcoming decision by the Federal Reserve to boost interest rates. If that is the outcome, which is seen as increasingly likely, it will strengthen the U.S. dollar and push the price of oil down further. With oil production already priced in, that is the major catalyst that could push the price of oil down significantly.”