Lack of OPEC Cut Could Drive Oil to $60

Some commodity fund managers believe oil prices could slide to $60 per barrel if OPEC does not agree a significant output cut when it meets in Vienna this week.

Brent crude futures LCOc1 have fallen by a third since June, touching a four-year low of $76.76 a barrel on Nov. 14.

They could tumble further if OPEC does not agree to cut at least one million barrels per day (bpd), according to some commodity fund managers’ forecasts.

 
“The market would question the credibility of OPEC and its influence on global oil markets if there was no cut,” said Daniel Bathe, of Lupus Alpha Commodity Invest Fund.

That could send Brent down to around $60, Bathe said.

“Herding behaviour and a shift to net negative speculative positions should accelerate the price plunge,” he said.

Yet fund managers and brokerage analysts are divided over whether OPEC will reach an agreement on cutting output.

Bathe put the likelihood at no more than 50 percent.

Oil prices have been falling since the summer due to abundant supply, partly from U.S. shale oil, and because of low demand growth, particularly in Europe and Asia.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza