Oil prices extended their losses and sunk to fresh four-year lows on Thursday as expectations of a cut in OPEC oil production faded following the Saudi Arabian oil minister’s comments Wednesday.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $72.22 a barrel, down $1.47, or 2% in the Globex electronic session. January Brent crude LCOF5, -2.37% on London’s ICE Futures exchange fell $1.92, or 2.5%, to $75.83 a barrel.
The Organization of the Petroleum Exporting Countries meets in Vienna within a few hours to decide whether its members will cut production to remove some of the glut in supply in global markets and boost oil prices.
The 12-member oil cartel typically steps in to adjust output when prices move sharply due to excess or insufficient supply. It currently has an oil production ceiling of 30 million barrels a day and has been producing in excess of this level in recent months. Read: A brief, wondrous history of OPEC landmark events
Crude-oil prices have plummeted this year, losing almost 30% of their value since June, mainly due to rising U.S. oil production driven by the shale boom and slowing demand growth in Asia and Europe.
Analysts say that OPEC will need to cut oil production much lower than its current ceiling for prices to make a significant recovery. Today’s OPEC meeting and any decision on production cuts is likely to set the tone for oil prices for the next few months and well into 2015.
Forget about an OPEC cut: On Wednesday, Saudi Oil Minister Ali al-Naimi said he expects the market “to stabilize itself eventually,” hinting he wouldn’t push for a cut in OPEC’s production targets.
“This is a very clear indication that the Saudis and OPEC will do nothing at the meeting … It is not 100% rock solid or set in stone, but it is a very clear signal,” Michael Wittner, head of oil market research at Societe Generale said. His bearish price forecasts are for $70 Brent and $65 WTI for the next two years.
Some other analysts agreed that OPEC is unlikely to cut production levels now.
“The two most likely outcomes in our view are either a very moderate production cut or none at all,” Stefan Graber, commodity strategist at Credit Suisse said in a report.
It is difficult to gauge how low oil prices will go today, but a range of $70-$72.16 for Nymex crude and $74.59-$76.75 for Brent crude is expected, analyst Daniel Ang at Phillip Futures said.
Nymex reformulated gasoline blendstock for December RBZ4, -1.89% –the benchmark gasoline contract–fell 2.3% to $1.9885 a gallon, while December diesel traded at $2.3702, 263 points lower.
ICE gasoil for December changed hands at $680.25 a metric ton, down $14.50 from Wednesday’s settlement.