A few days before the OPEC meeting on Friday, oil prices are once again showing some nervousness with Brent futures slipping and U.S. crude losing the majority of Monday’s gains.
Negative Effect of the Strong Dollar
Prices reacted to a report that predicts a rise in November OPEC production following an increase in output by Saudi Arabia. However, the situation was not helped by further strengthening in the dollar, as it rose to an eight months high. As a result, the demand for oil fell and by 2 p.m. on Monday, Brent had decreased by 20 cents, reaching $44.66 a barrel, and while U.S. Crude went up by 1 cent to $41.72, it was still significantly lower than its session high of $42.61.
OPEC Meeting Expectations
Few surprises are expected when it comes to its production policy when OPEC meets on Friday in Austria as it is showing no signs of slowing down production, even in the face of the significant financial strain that this is putting on Saudi Arabia. This stubbornness is alarming to some of the weaker members of the organization, who are starting to fear the very real possibility of prices dropping as low as $20 a barrel.
A significant change in policy could only happen if some of the bigger producers outside of OPEC, such as Russia, decided to join in a coordinated reduction in output. There is no fear of that currently, as Russia will not be attending the meeting. However, there will be an expert-level discussion between Russia and OPEC in mid-December, where the possibility might come up. However, with Russia currently trying to snatch a bigger share of the market from OPEC by drilling more oil, chances of that are not high.
Additionally, another player is expected to enter the market with increased output as Iran attempts to raise its exports by nearly a million barrels a day, following the lifting of the sanctions imposed over its nuclear program which will likely further depress prices.