Oil has slipped close to levels last seen during the financial crisis ahead of Opec’s meeting this week, with little sign the cartel will reverse its policy of maximising production to squeeze higher-cost rival producers.
A year on from the group’s landmark Saudi-led decision to open the taps, global oil markets have been swamped by near-record oversupply, leading hedge funds to amass one of their largest positions betting on further price falls.
While Saudi Arabia, the group’s de facto leader, has said that it will “listen” to weaker members’ calls to cut output to shore up the price at the meeting on Friday, market observers see little chance of the cartel altering its direction.
An Iranian official said Opec members aside from Saudi Arabia and it’s Gulf allies agree that the groups should reduce production to bolster prices, according to state news agency Shana.
“It is unlikely that these countries voluntarily cut their output,” Mehdi Asali, Iran’s national representative at Opec said on Wednesday.
Oil prices have more than halved in 18 months, stalling the growth in US shale output and slashing more than $200bn of investment plans from major energy companies, but output outside the group remains stubbornly resilient.
“It appears highly unlikely that Opec will agree on a change of its course on Friday, as not all targets have been accomplished and uncertainty concerning non-OPEC supply effects prevails,” said analysts at JBC Energy in Vienna.
Brent crude oil, the international benchmark, fell 3.2 per cent to $43.04 a barrel on Wednesday, not far above the six-year low of $42.23 a barrel hit in August. US crude oil benchmark West Texas Intermediate fell 3.3 per cent to $40.46 after the US government reported bulging petroleum stocks.