Oil slides as OPEC closes in on a production increase
Crude oil prices slid Thursday as OPEC and other producers moved closer to a deal on easing supply cuts that have been propping up prices for two years.
Brent, the international benchmark, was down 1.2% to $US73.43 a barrel in last night. It later hit $US73.05 by 7am AEST.
Crude has slipped as much as 4 per cent this week ahead of a meeting among oil ministers from OPEC and non-OPEC countries on Friday.
Some analysts are bullish abut the price of Brent over the longer term. Morgan Stanley has said it’s predicting $US90 a barrel because of demand from transport and heavy machinery markets.
But for now that seems out of reach.
Saudi Arabia and Russia, unofficial leaders of OPEC+, have been pushing for a rollback of production cuts amid falling output from several members of the cartel. Reuters reports that Iran, a critic of raising output, could go along with reversals under certain conditions.
OPEC members have suggested a production increase of about a million barrels per day, while Russia, who is not in the cartel but coordinates supply cuts with its members, has reportedly asked for a 1.5 million barrel per day increase.
Analysts at Fitch’s BMI predict a ccompromise to increase production by between 300,000 and 600,000 barrels per day.
Even without a hard target, analysts say a commitment to revisit the issue at the next OPEC meeting later this year is already priced into their end-2018 Brent forecast of $US73 a barrel.
“Even in the absence of a specific target, if there is a verbal commitment by the entire group to ensuring effective supplies and meeting demand, it will signal to us that there will be room for slippage of targets, especially over the summer months and for producers with spare capacity,” the analysts said.
Oil ministers from OPEC and other supply-cutting countries meet in Vienna on Friday and Saturday.