Oil Prices Continue Downward Trend, OPEC To Meet Nov. 27
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Despite the fact that North America currently drives the globe’s oil prices, OPEC could be the one that turns things around.
Speculation has increased that the Organization of Petroleum Exporting Countries, when it meets on Nov. 27, will reverse the downward trend the market is experiencing and reduce its production of barrels per day. As it stands, the West Texas Intermediate is trading at around $80 while the Brent market is sliding towards the $85 mark.
The market was shocked with Saudi Arabia said it would hold its production levels and give its Asian customers a break. However, analysts say, the continual price slide could be too much for its OPEC members.
According to John Kilduff, an analyst at Again Capital, OPEC could take action if the WTI hits $75 – it could stabilize the prices, even though the U.S. shale numbers are extremely high at the moment. Currently, this market is pushing 10 million barrels for next year, he said.
Kilduff said there have been numerous questions about oil field depletion and the realization is there that it could be happening.
On Sunday, Goldman Sachs released its new 2015 oil price forecast – WTI crude will drop to $75 a barrel while Brent will hit $85 for the first quarter of 2015. This is a drop of $15 for both markets from the prior forecast. Goldman noted that the drop could fall to $70 and $80, respectively on oversupply concerns before it heads back to the first-quarter levels.
Since summer, the amount of U.S. oil produced has increased 500,000 a barrel a day – currently at 8.9 million barrels produced a day. A reduced growth in worldwide demand has caused a supply surplus for the Atlantic.
In order to preserve the market share, Saudi Arabia has chosen to cut prices not production. The country’s break-even oil price sits around $89 a barrel. However, for some countries like Iraq and Iran the breakeven amounts are $114 and $130, respectively.
Analysts speculate the downward spiral for oil prices will make OPEC act to stop the trend, even if Saudi Arabia can withstand prices below the break-even point.
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