Nov 23, 2018

Oil prices slide ahead of crucial OPEC meeting

An oil pump in Los Angeles. Photo: Mark Ralston/AFP/Getty Images

Crude oil prices tumbled by several dollars to their lowest levels in over a year on Friday.

Why it matters: The latest slide will fuel the already intense focus on the December 6-7 OPEC meeting, where the cartel and allied producers — notably Russia — will decide on potential output cuts aimed at tightening the market.

The big picture: Prices are tumbling as traders respond to surging U.S. production, Saudi Arabia's announcement of higher production this month, the prospect of weakening demand growth, and White House pressure on Saudi Arabia to keep prices low.

By the numbers: Brent crude fell by almost $4 per barrel Friday and as of late morning was slightly under $59 per barrel, the first time it has slid below $60 since October of last year.

  • WTI, the U.S. benchmark, lost several dollars and is also at a year-long low at around $51. Oil prices have been on a generally downward trend for six weeks.

The intrigue: President Trump has recently been celebrating the price declines and putting public pressure on Saudi Arabia to keep prices low — at the same moment he's signaling a hands-off approach, for now, over the murder of journalist Jamal Khashoggi.

"One realises the president is pushing to keep prices lower for longer and now he has some political leverage against Saudi Arabia," said Petromatrix analyst Olivier Jakob, quoted in the Financial Times.

But, but, but: via Reuters, Morgan Stanley analysts see pretty good odds of an OPEC agreement that boosts prices again.

"We expect that OPEC will manage the market in 2019 and assess the probability of an agreement to reduce production at around 2-in-3. In that scenario, Brent prices likely recover back into the $70s," analysts Martijn Rats and Amy Sergeant said in a note.

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