Record Saudi oil production pulled down crude prices on Tuesday amid cautious trading ahead of the G20 gathering that starts in Argentina on Friday and next week’s OPEC meeting in Austria. International Brent crude oil futures briefly dipped below $60 per barrel before edging back to $60.10 per barrel at 0147 GMT, still down 38 cents, or 0.6 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $51.21 per barrel, down 42 cents, or 0.8 percent. Saudi Arabia raised oil production to an all-time high in November, an industry source said on Monday, pumping 11.1 million to 11.3 million barrels per day (bpd) during the month. Since their most recent peaks in early October, oil prices have lost almost a third of their value, weighed down by an emerging supply overhang and by widespread weakness in financial markets.
“The recent weakness seems … to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” said Jack Allardyce, oil analyst at financial services firm Cantor Fitzgerald Europe. Looking ahead, Allardyce said “a lot depends” on the outcome of the Group of 20 (G20) meeting in Buenos Aires where the United States and China are expected to address their trade disputes, and on a meeting of the Organization of the Petroleum Exporting Countries (OPEC).
The leaders of the G20 countries, which make up the world’s biggest economies, meet on Nov. 30 and Dec. 1, with the trade war between Washington and Beijing top of the agenda. OPEC will gather for its annual meeting at its headquarters in Vienna on Dec. 6, and the group will discuss its output policy together with some non-OPEC producers, including Russia.
In favour of low oil prices for consumers, U.S. President Donald Trump has put pressure on his political ally Saudi Arabia, OPEC’s de-facto leader, not to cut production. Despite this, most analysts expect OPEC to start withholding supply again soon.
“Our base case is for OPEC+ members to see through the pressure from President Trump and concentrate efforts on curbing the current oversupply in the market by conforming to a new production cut agreement next month in Vienna,” said Japan’s MUFG Bank. “If OPEC plus Russia cannot send a very strong message to the market, prices are poised to fall further, perhaps to Brent $50 per barrel and WTI of $40 per barrel or less,” Fereidun Fesharaki, chairman of energy consultancy FGE, wrote in a note to clients.
“The message must be decisive, firm, and the front must look fully united, to have any chance of slowly reversing the trend,” it added.