Oil price seen falling to $60 if OPEC does not cut output

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#1
All eyes are staring at OPEC meeting...Big Grin

Oil price seen falling to $60 if OPEC does not cut output

LONDON - Oil prices could plunge to $60 a barrel if OPEC does not agree a significant output cut when it meets in Vienna this week, market players say.

Brent crude futures have fallen 34 percent since June to touch a four-year low of $76.76 a barrel on Nov. 14, and could tumble further if OPEC does not agree to cut at least 1 million barrels per day (bpd), commodity fund managers say.

"The market would question the credibility of OPEC and its influence on global oil markets if there was no cut," said Daniel Bathe, of Lupus alpha Commodity Invest Fund.

That could send Brent down to around $60, Bathe said.

"Herding behavior and a shift to net negative speculative positions should accelerate the price plunge," he added.

Fund managers are divided over whether OPEC will reach an agreement on cutting output. Bathe put the likelihood at no more than 50 percent.

The oil price has been falling since the summer due to abundant supply -- partly from U.S. shale oil -- and low demand growth, particularly in Europe and Asia.

As a result, some investors believe a small cut -- of around 500,000 bpd -- would not be enough to calm the markets.

Doug King, chief investment officer of RCMA Capital, sees Brent falling to $70, even with a cut of 1 million bpd.

If OPEC fails to agree a cut, prices will drop "further and quite quickly", with U.S. crude possibly sliding to $60, he said. U.S. crude closed at $76.51 on Friday, with Brent just above $80.

"OIL WAR"

With member states struggling to balance budgets, many OPEC countries will be pushing for an output cut.

"Prices below $80 are putting significant strain on the cartel's weakest members such as Venezuela," said Nicolas Robin, a commodities fund manager at Threadneedle.

He said a bigger cut -- of 1 million bpd or more -- was an "outlier scenario", but such a move would rapidly push prices above $85.

"A move higher would likely be accelerated by the lack of liquidity owing to the U.S. (Thanksgiving) holiday next week," Robin added.

Doug Hepworth of Gresham Investment Management said: "A surprise significant cut, say of 2 million bpd, is needed to push prices back up to $80. And that would have to be accompanied by some new-found discipline in the non-Saudi members."

The market has been awash with conspiracy theories as to why Saudi Arabia has not already intervened. New York Times columnist Thomas Friedman hinted at "a global oil war under way pitting the United States and Saudi Arabia on one side against Russia and Iran on the other."

Tom Nelson, of Investec Global Energy Fund, said Saudi Arabia had allowed the price to fall to incentivize the smaller OPEC producers, which often rely on the biggest producer to intervene, to join Riyadh in cutting output.

"They (the Saudis) want to cut but they don't want to cut alone," Nelson said, adding that a cut of between 1 million and 1.5 million bpd should be sufficient to balance the market.

"The market really wants to see that OPEC is still functioning ... if there is a small cut, with an accompanying statement of coherence from OPEC that presents a united front, and talks about seeing demand recovery, and some moderation of supply growth, then Brent could move up to $80-$90." REUTERS
http://www.todayonline.com/business/oil-...epage=true
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#2
OPEC can't do much, they need the cash to maintain their own spending.

Just like iron ore, it will probably be a dash to the finish line, cheapest producer left standing.

Oil $30 baby!!!
Virtual currencies are worth virtually nothing.
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#3
(25-11-2014, 10:21 PM)BlueKelah Wrote: OPEC can't do much, they need the cash to maintain their own spending.

Just like iron ore, it will probably be a dash to the finish line, cheapest producer left standing.

Oil $30 baby!!!

There was a way to produce less, but earn the same, or better earn more. Big Grin

I reckon this is what is OPEC for...
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#4
If earning is the main driver in this sociopolitical climate Smile
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#5
oil should be as cheap as possible! Big Grin down down down!
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#6
The latest update...

Oil hits four-year low amid fading expectations of OPEC cuts

LONDON - Fading hopes of a meaningful cut in production at Thursday's OPEC meeting sent oil prices tumbling to a four-year low as Thanksgiving in the United States saw world stocks touch the brakes on their recent rally.

Gulf oil producers led by Saudi Arabia are expected to press the case at OPEC's meeting in Vienna for holding off from output cuts, despite calls from some members for it to prop up prices that have crashed by a over a third since June.

OPEC sources have told Reuters action is unlikely and Brent oil dropped by more than $1.75 in Asian and early European trading to $75.95 a barrel, the lowest level since September 2010.

"The scene has been set by the Saudi comments going in to this meeting that market forces should be allowed to determine the price here," said National Australia Bank strategist Gavin Friend.

"I think in terms of the big global economy picture, a lower oil price is a force for the good and the meeting today is really about whether we get an extension of the move or whether we get a reversal."
...
http://www.todayonline.com/business/asia...ak-us-data
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#7
Saudis win case for no OPEC output cut

Read more here


So no cut. Once again oil @ $30 baby!

Coupled with iron ore dropping to below $70 dollar, its a race to the bottom. This is a good example of "revert to mean" Those traders have been making too much money speculating on oil price, its time Mr. Market taught them a lesson. Looks like shale oil days are numbered. O&G related stocks should be taking a beating soon.
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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#8
Not unexpected as appears their strategy is to price out those shale fields. With production remains high, will we expect non-shale type oil producing companies to go for more efficiency equipment to stay well above the water line or get their in tip top condition? This may mean good news for some if so.

Just my Diary
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#9
Think the shale people will just go out of business... It'll take a lot more than efficiency (slavery anyone?) to stay above the water line. The Gulf states have large sovereign funds and much lower break-even costs, they probably can last indefinitely in this 'war'.
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#10
(28-11-2014, 07:49 AM)piggo Wrote: Think the shale people will just go out of business... It'll take a lot more than efficiency (slavery anyone?) to stay above the water line. The Gulf states have large sovereign funds and much lower break-even costs, they probably can last indefinitely in this 'war'.

Yeah but this war will last for quite a while because US oil producers have hedged their production at higher levels, so they won't go out of business immediately even if oil drops to $40 a barrel.

The future is very bleak for these companies though, oil prices have no chance of moving back up since the "everyone" knows US producers are desperately trying to hedge future production.
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