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Crude-oil futures extended their slide Wednesday, ending at a four-year low on expectations the Organization of the Petroleum Exporting Countries won’t move to significantly cut oil production. Saudi Arabia’s oil minister indicated that he wouldn’t push for a cut in production targets at the cartel’s closely-watched meeting in Vienna Thursday, The Wall Street Journal said. Other news reports also indicated a cut was unlikely.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January declined 40 cents to close at $73.69 a barrel, continuing to plumb levels last seen by a most-active contract in September 2010. January Brent crude on London’s ICE Futures exchange slid 54 cents to $77.80 a barrel. Expectations were never strong. Nymex crude has dropped nearly 3.7% since the beginning of the week. Oil futures are down more than 30% from their midyear high. “Indeed if OPEC were to trim the production limit, it will therefore concede more market share to shale oil producers, so it is not in the best interest of its members in the long term,”said Fawad Razaqzada, analyst at Forex.com.
In fact, for some larger OPEC members like Saudi, this short-term supply glut and therefore lower oil prices may be to their benefit from a longer-term point of view as this will undoubtedly put pressure on smaller and inefficient oil producers. Saudi Arabia’s oil minister, Ali Al-Naimi, said Wednesday that he believes the crude market “will stabilize itself,” according to media reports. Iran’s oil minister said OPEC should comply with its output ceiling. The Organization of the Petroleum Exporting Countries will meet on Thursday to decide whether to lower oil production levels to alleviate the current glut in global markets, and, more importantly, whether to boost oil production prices. The uncertainty and speculation surrounding OPEC’s decision have markets on edge.
“To be clear, depending on what happens, the OPEC meeting has the potential to set the stage for the markets going forward—not just in the short term, but in the long term too,” said Michael Wittner, Societe Generale’s head of oil research.
Earlier, the Energy Information Administration said U.S. crude inventories rose by 1.9 million barrels last week, defying forecasts for a 100,000 barrel drop.