Oil prices dropped on Tuesday, reversing abrupt gains made in the last two sessions, as investors’ worries rise.
Worries are rising ahead of the Organisation of the Petroleum Exporting Countries (OPEC) meeting on Sunday where the group will possibly discuss extending supply cuts.
Brent crude futures fell 64 cents, or 0.8 percent, to $81.68 a barrel by 0630 GMT, while U.S. West Texas Intermediate crude futures were at $77.21 a barrel, down 62 cents, or 0.8 percent.
Other contracts climbed about two percent on Monday, after three OPEC sources told Reuters that the organisation was set to contemplate whether to make extra oil supply cuts when it meets on Nov. 26.
Those gains were reduced on Tuesday.
“Investors took a wait-and-see attitude to confirm the actual OPEC+ decision,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
Eight analysts have predicted that OPEC is likely to extend or even deepen oil supply cuts into next year.
RBC Capital analyst Helima Croft stated: “We see some scope for the group to do a deeper reduction, but we would anticipate that Saudi Arabia would seek additional barrels from other members to share the burden of the adjustment.”
The leadership may therefore seek more voluntary adjustments from individual producers as reopening the quota agreements reached in June could prove difficult and result in drawn-out negotiations, she continued in a note.
A Singapore-based trader said OPEC action above and beyond a rollover of current cuts has been partially priced into the market.
Since late September, oil prices have decreased by approximately 16 percent due to the world’s largest producer, the United States, maintaining record-high crude output and market concerns about growing demand, particularly from China, which is the world’s largest oil importer.
Along with keeping an eye out for any indications of deflation, traders were also taking into account Walmart’s (WMT.N) warning from last week regarding the possibility of a U.S. recession in 2024 and how it might affect demand.
Based on a preliminary Reuters poll released on Monday, it appears that the United States’ crude and gasoline stockpiles increased last week, whereas distillates inventories were seen going down.
Weekly stockpile reports from the American Petroleum Institute and the Energy Information Administration are due later on Tuesday and Wednesday, correspondingly.