Singapore | Oil prices fell in Asia on Wednesday as the Organization of the Petroleum Exporting Countries (OPEC) prepared for a policy meeting in Vienna amid expectations the cartel will keep high output levels. US benchmark West Texas Intermediate for delivery in January was down 20 cents at USD 41.65 and Brent crude for January was trading 14 cents lower at USD 44.30 a barrel at around 1000 IST.
Traders will be closely tuned in to Friday’s OPEC gathering for any decision on whether they will slash lofty output levels currently at more than 31 million barrels per day. A decision to cut would ease a global crude supply glut that has weighed down prices for more than a year. Most analysts expect OPEC to decide against a production cut because of the influence of Saudi Arabia and its Gulf partners Kuwait, Qatar and the United Arab Emirates which are focused on retaining market share.
A decision by OPEC in November last year to maintain high output levels accelerated the oil price plunge from peaks of more than USD 100 a barrel in mid-2014. Saudi Arabia, Kuwait, Qatar and the United Arab Emirates account for more than half of OPEC’s output of 31.5 million barrels per day, and others in OPEC cannot force them to cut output, IHS Energy said in a report. Without the Gulf group, there can be no effective OPEC agreement, it said. Iran is also expected to announce at the meeting its plans to increase its oil exports when crippling western sanctions are lifted under a landmark deal with major powers to curb Tehran’s nuclear program. Iran’s deputy foreign minister Abbas Araghchi said last week his country expects the deal to come into force in early January, when Tehran will have implemented its commitments. Indeed, Saudi Arabia is hardly likely to cut back its output to make space that its competitors in general and its arch-rival Iran in particular might be able to fill if and when sanctions are lifted, IHS said.
The market is also watching a report on US commercial crude inventories to be released later today as a gauge for demand in the world’s top oil consumer.
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