2023-11-22 20:43:00
Hoy 17:43
Oil extended its decline following the OPEC+ meeting was rescheduled, denting traders’ expectations that the cartel will intervene to reduce supply.
West Texas Intermediate fell as much as 5.1% and traded below $74 a barrel following the organization’s meeting was delayed until next week. The talks had hit turbulence when Saudi Arabia entered into negotiations with member states over production levels. Meanwhile, U.S. crude stockpiles rose to 8.7 million barrels last week, hitting the highest level since July, adding another headwind to prices.
Wednesday’s declines reflect market concern regarding what might happen if OPEC+ fails to reach a deal, said Rebecca Babin, senior energy trader at CIBC Private Wealth.
Offshore oil exploration might be a “Vaca Muerta II”
“The market lives in fear of an outcome like in 2020,” when the cartel failed to stop the fall in prices and oil even went temporarily negativesaid.
The market situation
In the last weeks, Crude oil has fallen to three-month lows amid signs that supplies are rising. Rising production from nations both inside and outside the Organization of the Petroleum Exporting Countries and its allies has complicated preparations for the meeting.
Major market indicators along the oil futures curve have also shown weakness in recent days, countering expectations that supplies would shrink towards the end of the year. The gap between the two closest WTI contracts follows a bearish contango pattern, in which longer-term prices have a premium over closer ones.
This represents an additional challenge for OPEC+, since increases the risk that trend-following funds will increase selling pressure, since contango is usually considered a bearish signal. Some large oil and commodities exchange-traded funds have also seen outflows in recent days.
Translated by Paola Torre.
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