Oil drops in volatile action as market guesses on OPEC’s move
Market is oversupplied to the tune of two million barrels a day, depressing prices
Nabors Industries Ltd drills for oil in the Orinoco Belt near San Diego de Cabrutitas, 300 miles from Caracas, Venezuela. Photograph: Diego Giudice/Bloomberg News
Oil prices tumbled to near four-year lows before paring some losses as the market was hit with conflicting signals on whether Opec will agree to curb output this week.
Crude prices reversed early gains and fell by more than $1 a barrel after a meeting in Vienna on Tuesday between Saudi oil minister Ali al-Naimi and officials of Venezuela, and non-Opec members Russia and Mexico ended with no deal on cuts.
That meeting came before Thursday’s gathering of the Organization of the Petroleum Exporting Countries in the Austrian capital.
But both benchmark Brent and US crude prices recovered some ground after the Wall Street Journal reported that OPEC members were edging toward a compromise on lowering output by adhering more closely to previous production limits. “The market’s all over the place with the headlines we’re getting today,” said Tariq Zahir, managing member of Tyche Capital Advisors in New York.
“The reality is Opec needs a cut of no less than two million barrels per day (bpd) to clear the oversupply in the market, and they need to hold that down if they really want to see prices recover.”
Benchmark Brent crude was down $1.20 at $78.48 a barrel yesterday, falling from an intraday high of $80.44. US crude fell $1.40 cents to $74.38, drawing near a four-year low of $73.25 touched two weeks ago.
Tuesday’s pre-Opec meeting broke up with no sign of any accord in the near term, although Venezuelan foreign minister Rafael Ramirez said the four nations agreed that prices below $80 were not desirable.