Forget conspiracy theories and be prepared for OPEC to cut output in November because this is what they need to do and have done in the past, veteran oil traders who run and co-own some of the world’s biggest trading firms told the Reuters Commodities Summit. The views from the top executives of Vitol, Gunvor and Mercuria go against expectations that the 12-member Organization of the Petroleum Exporting Countries is unlikely to step in and support prices.
Oil prices have fallen sharply from $115 a barrel in June to a four-year low near $82 on Tuesday on weakening demand, ample supply and the perception that OPEC heavyweight Saudi Arabia is happy to keep prices at levels of $70-$80 per barrel. OPEC members Kuwait and Iran have also said a cut in production at the Nov. 27 OPEC meeting was unlikely. Saudi Arabia has yet to comment publicly.
“My feeling is we’re underestimating now the possibility of OPEC cutting,” Vitol’s [VITOLV.UL] chief Ian Taylor said. “Everybody says they are not going to cut, and I’m not 100 percent sure. I think there will be serious discussions at the OPEC meeting about cutting.” Taylor, who at last year’s Reuters Summit saw a chance of a steep fall in oil prices, said the major decline may have already occurred. “I’m not convinced we’ve got another big leg down,” he said.