Oil prices tumble as doubts over planned crude output cut rise

For the upcoming week Stratas is forecasting that the price of Brent crude will stay relatively flat for the first part of the week and then decline with support at $45.50/bbl.

This is while the prices for West Texas Intermediate (WTI) oil increased by 7.85 percent. Iranian Oil Minister Zanganeh has asserted his country’s right to keep raising production as its oil industry recovers global sanctions.

Saudi tried increasing production into a falling price environment in November 2014 and that, in retrospect, was a bad strategy. It could also restore some authority to OPEC as an arbiter of prices and supplies after years of inaction.

In December 2008, as oil demand and prices slumped during the global financial crisis, the Organization of Petroleum Exporting Countries, announced a record output reduction. “It could still imply an OPEC production level considerably in excess of 33 million bpd, depending on developments in Libya and Nigeria and the speed and rigor of compliance”, David Hufton, managing director of brokerage PVM Oil Associates Ltd said in a note.

“The losers are Europe and Japan – oil-importing regions of the world” with barely growing ecomonies, said Guatieri.

OPEC in September laid out the contours of a cutback the ministers needed to sign off on Wednesday. It seems clear from the outside that Saudi Arabia wants to cut production, and the statement from Algiers noted crude production of 32.5-33.0 million barrels per day (mmbd) as a cartel target.

Iraq, OPEC’s second largest producer which had previously resisted cuts, providing a hurdle to an agreement, agreed to reduce output by 200,000 bpd to 4.351 million bpd.

He also said Russian Federation was ready to reduce production.

Zanganeh said he is “optimistic”, adding that non-OPEC oil nations “already have agreed to cut after our decision”.

“We are to present our views about this proposal at the …”

Oil dropped almost 4 percent the previous session over disputes between Saudi Arabia, Iran and Iraq regarding details of the planned cut. And some analysts expect them to rebound if the meeting succeeds in reaching the targeted production cap. Iran’s quota was set at 3.797 million barrels a day, down 90,000 barrels from October.

On Tuesday, Iran wrote to OPEC saying it wanted Saudi Arabia to cut production by as much as 1 million bpd, more than Riyadh was willing to offer, OPEC sources who saw the letter told Reuters.

In its most recent report on U.S. crude oil production, the U.S. Energy Information Administration said domestic output is forecast to average 8.8 million barrels per day in 2016, lower than 2015’s average of 9.4 million barrels per day and roughly equal to the agency’s 2017 forecast of 8.7 million barrels per day.

Crude prices plunged as a result.