Oil Drops Sharply as OPEC Struggles to Agree on Cuts
06 Dezember 2018 - 08:06PM
Dow Jones News
By Dan Molinski and Georgi Kantchev
Oil prices fell sharply Thursday after OPEC delayed a decision
on cutting crude output, while a sliding stock market drove
investors away from riskier assets across the board.
West Texas Intermediate futures dropped 3.3% to $51.17 a barrel
on the New York Mercantile Exchange. The U.S. benchmark crude price
briefly fell more than 5% to an intraday low of $50.08. Brent, the
global benchmark, was 3.3% lower at $59.51 a barrel.
The Organization of the Petroleum Exporting Countries concluded
Thursday's meeting in Vienna with an agreement that production cuts
are needed but didn't set a level for the cuts. OPEC is expected to
discuss production levels with its allies, led by Russia, on
Friday.
Prices tumbled Thursday after Saudi Oil Minister Khalid
al-Falih, while leaving the OPEC meeting, said he was "not
confident" OPEC and its allies will reach an agreement on reducing
oil production.
If no deal is reached, crude "prices would fall in the
foreseeable future," said Tamas Varga, an oil analyst at brokerage
PVM.
OPEC delegates said they are considering output cuts of as much
as 1 million barrels a day. To some analysts and investors, that
level won't be enough to convince investors and analysts that the
group will be able to balance the market.
OPEC and Russia have "got to announce cuts of at least 1.3
[million barrels a day] to 1.5 to get any sort of bounce in
prices," said Kyle Cooper, a consultant for ION Energy.
The group is under pressure to support prices after a more than
30% tumble from the multiyear highs reached in October. Thursday's
selloff extends a rocky stretch for energy markets over the past
few weeks. Concerns about rising global crude supply, combined with
anxieties about the health of global economic growth -- and its
implications for oil demand -- have sent crude prices sharply
lower.
A slide in stock markets on Thursday added to concerns among
investors. The arrest of a high-profile Chinese executive in Canada
hit share prices from Asia, Europe to the U.S. The news comes at a
vulnerable time for global trade, after Beijing reiterated its
intent to follow through on promises aimed at easing trade
hostilities with the U.S.
"Oil prices are under pressure, somewhat reflecting the sell-off
in stocks, somewhat reflecting skepticism OPEC will come through
with sufficient production cuts," said Rob Haworth, a senior
investment strategist, at U.S. Bank Wealth Management. "For now we
believe prices remain under pressure, even if OPEC can come through
with production cuts."
The bearish news out of Vienna overshadowed a report from the
U.S. Energy Information Administration on Thursday that showed
crude oil stockpiles fell by 7.3 million barrels last week, ending
a 10-week streak of increases.
"The report was considered quite bullish," said ION's Mr.
Cooper.
There also remain a number of stumbling blocks for OPEC to reach
a decision. Iran, OPEC's third-biggest producer, said Thursday that
it can't participate in any cuts until the U.S. lifts sanctions
against the country. The country's oil minister, Bijan Zangeneh,
said Thursday that oil prices between $60 and $70 a barrel would be
acceptable.
President Trump, meanwhile, has voiced opposition to an
agreement that would reduce crude production.
"Hopefully OPEC will be keeping oil flows as is, not restricted.
The world does not want to see, or need, higher oil prices!" Mr.
Trump tweeted Wednesday.
Write to Dan Molinski at Dan.Molinski@wsj.com and Georgi
Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
December 06, 2018 13:51 ET (18:51 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.