On Tuesday, oil prices dropped with ambiguity over the outcome of a key OPEC meeting this week that will decide on the next year’s production policy. Brent crude oil dropped 58 cents to $63.26 a barrel by 1240 GMT and U.S. light crude dropped 45 cents to $57.66.
The OPEC and other main producers, including Russia, meet on Nov. 30 to discuss the continuation of limiting production to drain global inventories driving up oil prices. Production was cut by 1.8 million barrels per day (bpd) in January and it agreed to keep down output until March. It has been expected by the market that the OPEC will extend the limits for at least another six months, now it is uncertain.
“We believe that the outcome of this meeting is much more uncertain than usual,” according to analysts from Goldman Sachs, proposing that the market was incorrect to just assume that OPEC would agree on limiting output until the end of next year.
“We view risks to oil prices as skewed to the downside this week as we believe that current prices, time spreads and positioning already reflect a high probability of a nine-month extension,” according to the analysts.
Reservations whether Russia will agree to unite with the OPEC in an extension of production limits beyond March has arose. The Russian economy has been negatively affected by the continuing cuts said the Economy Minister, Maxim Oreshkin.
“(But) if the production cut agreement ends in March 2018, our forecast shows there would be a projected 2.4 million bpd year-on-year increase in world oil supply for 2018,” according to Ann-Louise Hittle, vice president for macro oils.
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On Friday U.S. crude hit $59.05 a barrel, the highest since 2015, driven by the outage of the Keystone pipeline. TransCanada Corp stated that on Tuesday it would restart the 590,000 barrel-per-day pipeline at reduced pressure if approved by U.S. regulators.
“This bearish development adds to the underlying unease surrounding the outcome of Thursday’s OPEC meeting,” stated by oil analysts.