Oil Prices Edge Lower Despite Projected Drop in US Inventories

OPEC logo is pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria September 28, 2016. “If OPEC cuts down output at 1 million barrels a day, this will help prices to go up and Iraq will make gains from this”, he said.

OPEC’s next official meeting is on November 28, when members will speak with non-OPEC oil producers including Russian Federation, the world’s biggest oil producer.

In its third flip-flop position on joining OPEC production cuts in as many days, Iraq signaled on Wednesday that it could be willing to cut its production and support OPEC’s efforts to reduce the glut and prop up prices. The two are “in a coincidental collusion in Opec because it suits their common interest of getting as high a quota as possible”.

So regardless of the outcome of the meeting, which is still very much in question, OPEC, left on its own to cut a mere million barrels per day, can not realistically and fundamentally rebalance the heavy overhand with demand in the six months that they are suggesting.

Although the price have continuously tried to recover in the previous weeks and trading sessions, it was only till a statement and comments from Russian President Putin regarding their country’s intention to increase output despite not being a member of the organization has led the price to jump back to as much as $49 recovering from its recent decline. It is yet to decide on individual output limits.

If the new United States administration under Donald Trump prioritizes trade sanctions over stimulus then oil prices will likely end 2017 in the $45-$50 per barrel range as long as OPEC delivers the promised production restraint, according to the report.

Under the Algerian proposal, Iran was asked to cut 4.5 percent from nearly 4 million bpd, according to sources.

Oil has rebounded from an eight-week low on November 14 as members of the Organization of Petroleum EXPORTING Countries make renewed diplomatic efforts before their November 30 meeting to finalize the supply deal they agreed to informally in September.

However, sources also said the representatives of Iran, Iraq and Indonesia had expressed reservations during talks that continued for 11 hours about their level of participation in what would be the group’s first supply-limiting deal since 2008. Iran has added about 880,000 barrels per day since the loosening of sanctions. In October, OPEC produced a record output of 33.6 million per day.

Doubts weighed over whether Saudi Arabia and Iran could put their geopolitical disputes aside and whether countries whose finances are in dire straits due to low oil prices would resist the urge to pump crude at high rates.

USA stocks opened lower on Wednesday as a drop in the healthcare sector took the shine off a post-election rally that had powered Wall Street to record levels. They could cheer even if the production ceiling is set higher like 34 million barrels per day but in such a case a longer time period to adhere to the ceiling must be there preferably five years. The Saudis vetoed an earlier deal in April when Iran, a political as well as an economic rival, refused to join in cutting.

“We expect OPEC will reach an agreement at next week’s biannual meeting in Vienna”. But on top of the pending Iran and Iraq issue, securing cooperation from non-members including Russian Federation has emerged as a mounting concern among some Opec countries, said one delegate.