Yesterday, oil prices crashed by 4% at a time amid expectations that OPEC members would fail to agree on the promised oil production cap they planned in late September. For those of you who don’t know, OPEC about to hold another summit in Vienna today, on November 30th.
Brent oil dropped in price down to $46,92/b, which is 4% below the close price of the previous trading day. WTI oil dropped in price down to $45/b, which is also 4% below the close price of the previous trading day.
In the meantime, Reuters report that the mentioned price drop has to do with market expectations. Indeed, chances are OPEC nations are not going to compromise and sing the long-awaited agreement forcing OPEC oil producers to cap their oil production. The likelihood of such a scenario is going down since Iran and Iraq are the 2 OPEC members going against the plan. They don’t want to cap their oil production.
Iran is more interested in winning back the market share lost after the USA and its Western allies imposed sanctions on Iran. That’s why the Iranian government seems determined to sacrifice short-term profits for the benefit of longer-term market share. That’s why Iran doesn’t want to cap its oil production even though the rest of the OPEC nations are determined to do so. Iraq is another OPEC member asking for exceptions since crude oil is the major source of income for the country waging war on terrorists.
Experts expect OPEC to make decision at the last minute even though the topic has been discussed for several months. They expect oil prices to go above $40/b if the agreement is eventually signed. However, if that’s not the case, we are likely to see oil prices going all the way down to $40/b and below.
