The scheduled meeting of OPEC members with non-OPEC crude exporters for the third time in Vienna, Austria, is dominating the headlines. It should provide an answer to the million-dollar question — will oil continue to trade above $55 a barrel?
The landmark production-cut accord, first signed in late 2016, helped oil cross the $50-a-barrel mark. After the deal, with the advancement of crude, major energy players regained financial strength and have been rewarding shareholders with healthy dividends.
OPEC Meeting
On Nov 30, OPEC members will meet non-OPEC players to decide on an extension of the crude production cut accord beyond the first-quarter 2018. More than 20 oil producers, including leading exporters like Russia and Saudi Arabia, will participate in the Vienna meeting. The agreement entails putting roughly 1.8 million barrels a day of crude oil out of the market.
Possible Outcomes
Most analysts are expecting the Vienna meeting to conclude with a deal extension for another nine months next year.
But Russia concerns might compel OPEC to push for either a shorter extension, say six months, or to delay its verdict until the first quarter next year, said CNBC. Both the decisions contradict the market’s expectations and hence could lead to a fall in oil prices.
Tom Kloza of Oil Price Information Service added that it will be difficult for crude to cross $59.05 even if the cartel chooses the nine-month extension because recent crude prices are already reflecting the information.
Six-Month Extension
Alternative investment manager Again Capital believes that it will be hard to convince Russia for more than a six-month extension.
Again Capital added that Russian oil producers are not willing to extend the agreement as it will open up scope to ramp up drilling activities in the U.S. This, in turn, will hurt crude prices.
No Decision on Deal Extension
If OPEC refrains from taking any decision in the Nov 30 Vienna meeting, oil prices will collapse.
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