Oil Prices Drop Ahead of OPEC Production-Cut Figures
Oil prices faced a brisk selloff Thursday after investors caught wind of news that the Organization of the Petroleum Exporting Countries (OPEC) had agreed to reduce output by an unspecified amount. The Saudi-led cartel is reportedly waiting for Russia to come on board before declaring specific output levels for the new year.
Both U.S. and international crude benchmarks declined sharply through the morning session. The West Texas Intermediate (WTI) benchmark for U.S. crude futures reached a session low of $50.23 a barrel on the New York Mercantile Exchange. Nymex futures were last down $1.21, or 2.3%, to trade at $51.68 a barrel. WTI recently established a new yearly low of $49.41 a barrel.
Brent crude, the international futures contract, bottomed at $58.36 a barrel on London’s ICE futures exchange. That’s 58 cents higher than the 52-week low. At last check, Brent was down $1.07, or 1.7%, at 60.49 a barrel.
OPEC Reaches Tentative Deal
OPEC concluded its meeting in Vienna on Thursday with a tentative deal to cut production levels. However, the producer group has yet to communicate an official output target as member countries awaited Russia’s participation in the agreement. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed last week to reduce output levels collectively but Moscow has yet to confirm.
According to Reuters, Saudi Energy Minister Khalid al-Falih said a final decision by OPEC and its allies was likely before the weekend.
It was reported earlier that the 15-member cartel was eyeing production cuts of 1.3 million barrels per day to stem the more than 30% drop in crude prices since October. The two-month slide has been exacerbated by a political standoff between the United States and China, which has undermined the outlook on global trade, economic growth and energy consumption.
U.S. President Donald Trump has been highly critical of OPEC’s production policies. On Wednesday, the U.S. president once again called on OPEC to keep output steady and not support any policy that would raise prices.
Al-Falih on Thursday implied that an output cut of 1 million barrels per day was more than enough to drain excess supply from the market. That’s because Canada recently called on its producers in Alberta to slash output levels by roughly 325,000 barrels per day.
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