The Organization of the Petroleum Exporting Countries (OPEC) is expected to start slashing oil output next month to avoid a supply glut as the production of oil outweighs demand. But the move has so far had little impact on prices, as the value per barrel has dropped by around 20 percent so far in November, in a seven-week streak of losses. Brent crude, the global benchmark, nosedived to as low as $59.38 per barrel, its lowest level since October 2017. By 2.45pm GMT, Brent was trading at around $59.80, down 4.47 percent from the open.
US crude was worth $51.47, a decline of 5.78 percent, at the same time of trading.
Tamas Varga, analyst at London brokerage PVM Oil, said: ”Oil bears have re-asserted their authority.
“The weakness is the continuation of the prevailing bearish sentiment aided a little bit by the stronger dollar.”
Oil production has surged this year with the International Energy Agency predicting non-OPEC output alone to rise by 2.3 million barrels per day this year.
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Demand for next year is expected to grow by 1.3 million barrels per day.
Adjusting to lower demand, top crude exporter Saudi Arabia said on Thursday that it may reduce supply as it pushes OPEC to agree to a joint output cut of 1.4 million bpd.
US President Donald Trump reacted with fury on the possible slump in oil production, calling on both Saudi Arabia and OPEC to reconsider.
Mr Trump wrote on Twitter: “Hopefully, Saudi Arabia and OPEC will not be cutting oil production.
“Oil prices should be much lower based on supply!”
If OPEC agrees to cut production at its meeting next month, oil prices could recover sharply, analysts say.
Morgan Stanley commodities strategists Martijn Rats and Amy Sergeant wrote in a note to clients: “We expect that OPEC will manage the market in 2019 and assess the probability of an agreement to reduce production at around 2-in-3.
“In that scenario, Brent prices likely recover back into the $70s.”
If OPEC does not trim production, prices could head much lower, argues Lukman Otunuga, Research Analyst at FXTM.
He said: ”(U.S.) oil has scope to depreciate towards $50 a barrel in the near term.”