Oil Slips, Markets Still Uncertain about OPEC Policy

Crude-oil futures were lower in Asian trade Tuesday with investors largely uncertain about the outcome of the meeting of the Organization of the Petroleum Exporting Countries next week.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in December CLZ4, +0.90% traded at $75.34 a barrel, down $0.30 in the Globex electronic session. January Brent crude LCOF5, +0.74% on London’s ICE Futures exchange fell $0.35 to $78.96 a barrel.

Opinion is divided about the production policy and prices at the OPEC meeting on Nov. 27 and money managers for the time being are reluctant to bet on increasing oil prices, Harry Tchilinguirian, head of commodities at BNP Paribas said.

He said OPEC’s decision will come on Thanksgiving when U.S. markets are closed and liquidity is low, which means that prices could prove to be highly volatile.

Analysis also suggests stronger negative sentiment, which means that a potential fall in oil prices is likely to be sharper than a potential increase in oil prices, depending on OPEC’s decision, Mr. Tchilinguirian said.

Markets have been speculating whether the 12-member oil cartel will cut its oil production to reduce oversupply and boost prices. Saudi Arabia, OPEC’s largest oil producing member, has typically acted as the swing producer but may no longer take unilateral responsibility to undertake supply cuts.

Saudi Arabia’s oil minister Ali al-Naimi recently indicated that it won’t cut production unless there is a collective commitment by OPEC, according to a Wall Street Journal report citing officials.

Markets are nervously awaiting the OPEC meeting next week but it is too early to make a firm call on an OPEC decision, Greg Priddy, director of energy and resources at Eurasia Group said.

Source: MarketWatch