As traders adopted a more cautious outlook in anticipation of the upcoming OPEC meeting scheduled for next week, Oil prices have dropped these past few days. The main focus of the meeting are supposedly output ceilings to curtail a freefall in the price of the product. Ahead of the meeting, Brent crude futures dropped by 77 cents to settle at $61.95 per barrel at midday.
OPEC (the Organization of Petroleum Exporting Countries) alongside some non-OPEC members spearheaded by Russia, has collectively been gradually restraining output since the beginning of the calendar year in a bid to try and lower global storage and boost prices.
This deal (which controls oil output) expires in March of 2018 and the OPEC meeting in November 30th is focused on the future of the deal with the popular expectation being that the deal gets extended to cover the whole of next year.
Associate strategist at PVM Oil Tamas Varga was quoted saying, “It is widely believed that OPEC together with 10 non-OPEC countries will roll-over their production for the whole of 2018 although Russia is holding its cards close to its chest,”
OPEC itself has forecasted a rise in demand for its own crude oil to the tune of 460,000 barrels per day to 33.42 million bpd next year. This comes in stark contrast to the forecast from the International Energy Agency’s (IEA) forecast of a drop to the tune of 320,000 bpd taking demand to 32.38 million bpd.
Mirroring the high degree of uncertainty regarding the possible outcome of the scheduled meeting, money manager in the market for Brent crude cut their net long position for the first time in 30 days, by a little over 5,000 lots to 537,557.
Finally, in a quote from a Commerzbank analyst, “Prices are likely to correct after the OPEC meeting due to profit-taking by speculative investors,”.