Crude declines nearly 4 percent after no progress on reducing production before OPEC Meeting

Crude declines nearly 4 percent after no progress on reducing production before OPEC

Crude declined nearly four percent as Iran and Saudi Arabia haven’t made progress on talking about freezing production. As the supply remains strong, crude oil prices in the international market declined. As per last reports, LCOc1 was down by 3.7 percent to $45.89 per barrel. Organization of the Petroleum Exporting Countries will meet in few days and decide on next course of action on production.

West Texas Intermediate (WTI) CLc1 was down by four percent at $44.48. The reports about little progress on talks between Saudi Arabia and Iran led to pressure on oil prices. The Organization of the Petroleum Exporting Countries and other oil producing countries will be meeting in Algeria.

The U.S. government reported reduction in stockpiles for third straight week. The sentiment in energy markets was strong as traders were expecting increase in demand and lower supply. Before the decline on Friday, crude prices were heading towards their biggest weekly in more than a month.

As per a report published in Reuters, the meeting in Algeria will remain till consultations and might not lead to any decision. The oil prices were earlier trading strong after reports that Saudi Arabia was ready to cut production if Iran agreed to reduce its output.

The oil drilling rig count in the United States was up by 2 to 418, as per the latest data. The data from Russia also puts pressure on oil prices. The heavyweight non-OPEC oil exporter has recently hit the highest in output.

Commenting on OPEC talks in Algeria, Macquarie Capital said, "A 'No Deal' result in our definition will be one where OPEC not only failed to get an explicit deal out of the meetings, but also failed to develop a forward plan. This would be another epic fail by OPEC."

In a research note, Credit Suisse said, "Let us reiterate that we still don't expect that a fundamentals driven rally will be strong enough to drive prices above $50 per barrel until Q1 or Q2 of next year. Equally, however, we don't see a good fundamentals-based case for prices to collapse and set new cycle-lows all over again."

Oil prices could remain low for the rest of the year. With every increase in crude price, we have noticed pressure at higher levels. As oil producers and exporters are getting comfortable with crude price in $40-50 per barrel, they have maintained high level of production, leading to oversupply. In case of certain oil-exporting economies, the governments have no choice but to keep high level of production to deal with their expenses.


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