Oil prices end near flat on uncertain outcome from OPEC meeting

Crude oil prices are up nearly 20 percent from early November in anticipation that the 14 members will agree to hold production levels at a ceiling proposed in Algeria in September. “Now, with extra supply on the market a deal looks much more challenging to achieve”. Ironically, the biggest beneficiary of OPEC’s efforts could be US shale producers.

The IEA (International Energy Agency) expects non-OPEC crude oil production to rise by 500,000 bpd (barrels per day) in 2017-compared to 2016.

“An OPEC deal is not priced into the market yet, even if the confidence in a deal seems quite high”, said Bjarne Schieldrop, chief commodities analyst at SEB AB bank in Oslo.

ANALYST TAKE: “This is still not a done deal and although numerous countries involved are making the right noises we must not forget how challenging it will be to try to push a production cut deal through, with differing ambitions from the different parties involved”. More recently, OPEC production has risen to new record levels, showing that petro-nations are in need of cash flows to plug budget deficits. “The outlook for oil prices is really a binary one dependent on the upcoming meeting”.

On a two-day meeting, the first day marked OPEC making progress on some details to cut down on output.

Away from oil markets, gold edged slightly higher, with Comex gold future contract for December delivery gaining $7.30, or 0.61%, to $1,217.20 an ounce, after the dollar’s rally petered out. 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. ABN AMRO – “50/50 CHANCE OF CUT” “We estimate the possibility of an actual OPEC production cut as 50-50”. Using the latest production figures, however, OPEC members would have to agree on cuts from somewhere to make the proposal work as planned.

In addition to Iraq, Iran, Nigeria and Libya have also insisted they should be exempt from lowering their output. More recommendations will be welcomed at OPEC meeting on November 30. The nimble and increasingly competitive USA shale market is likely to respond positively to sustained prices of about $50 a barrel. CNBC quotes analysts who say the biggest cuts would have to come from Saudi Arabia, Kuwait and the United Arab Emirates.

In a surprise move, the Organisation of the Petroleum Exporting Countries in September agreed to a deal to trim production and boost prices depressed since 2014. Asked whether that included Iran and Iraq, he replied: “Everybody”.