USA crude oil prices remain weak ahead of OPEC meeting

Oil headed for its largest monthly drop since July as Iran signaled the Organization of Petroleum Exporting Countries won’t reduce its production target at a meeting this week.

The OPEC meeting on Friday comes nearly a year after its historic decision, led by Saudi Arabia, to refuse to prop up prices.

Of course, Saudi Arabia is relatively well insulated by the size of its coffers when compared to other oil exporters.

In related news, Stein’s law says oil prices will rise: Kemp.

“Gulf producers are not inclined to change their policy of defending market share rather than price despite heavy income losses”, Saudi economist Abdulwahab Abu-Dahesh said.

Iran’s Zanganeh said in October that “the Opec should decide to manage the market by reducing the level of production”. Low prices risk future supply problems and while this could in turn boost prices, it is a risk for the industry.

Most recent data showed that Russian oil firms are drilling even more oil wells signalling it is ready for a protracted fight for market share with OPEC, as its industry can carry on even if oil prices reach $35 per barrel.

OPEC is set to debate a technical increase of its production ceiling later this week to accommodate returning member Indonesia, delegates said on Monday, while hopes of a meaningful dialogue with rival non-OPEC members all but faded.

Despite the crash in prices from the $115 peak past year, non-Opec supply has been slow to respond. Higher cost producers are vulnerable – Nigeria and Ecuador need $120, Libya $269 and Iran $87.

“However, comments from key OPEC ministers still seem relatively sanguine”.

LME aluminium slumped 2.9 per cent to end at $US1,458 a tonne, still above Monday’s six-and-a-half-year low of $US1,432.50. Money managers have been searching for any hint of how to position investments for the year ahead and could react very quickly once the ECB, Opec and US Federal Reserve decisions are known. “His point is that $42 oil does not account for other important costs like that of finding the oil or purchasing the land in which the crude is situated”. Baker Hughes data shows the rig count is around a third of what it was a year ago.

Crude oil use is moving toward being used exclusively as fuel for transportation, he said. But it’s becoming clear that the kingdom is paying a heavy price for its policy. As you can see, the price has fallen a long way since it peaked in 2014. This is actually down about 20,000 barrels from August, and it is now at the lowest level since June.

But the oil markets will think about that tomorrow.

That would mean lifting the country’s 40-year-old ban on exporting crude oil and easing restrictions on natural gas exports so more shipping terminals can be approved.

Venezuela’s del Pino, who participated in the Tehran meeting, warned that oil prices – which have been trading recently around $45/barrel – could sink to to the “low-20s” if OPEC did not restrict the flow of crude to the glutted global market. Back then, OPEC’s production was roughly the same as it is now. The chance of that happening now looks slim.