Trading action was held in check ahead of weekend meetings of the Group of 20 global leadership in Argentina, where oil talks are expected take place on the sidelines ahead of an official meeting on Dec. 6 between the Organization of the Petroleum Exporting Countries and its allies.
“Indeed, markets are looking towards next week’s OPEC meeting as a potential source of support for oil prices, hoping the cartel will make a credible commitment to curb its output and stabilize prices,” said Marios Hadjikyriacos, a market analyst with broker XM.
“Heading into the meeting, it wouldn’t be a surprise to see crude prices stabilize, or even recover, as speculation for a cut grows, particularly if the relevant officials continue to strike an optimistic tone,” he said.
On Friday, West Texas Intermediate crude for January delivery CLF9, -1.07% on the New York Mercantile Exchange fell 92 cents, or 1.8%, to $50.53 a barrel after trading as low as $49.65. The January contract hung onto a modest gain for the week, up 0.2% from last Friday.
A plunge of around 23% for WTI for November is in store after trading at a four-year high as recently as early October. As the downbeat mood takes hold, analysts at Oppenheimer said in a Friday note that they’re cutting their WTI oil price estimate for 2019 by 15%, to $61 a barrel.
Global benchmark January Brent crude LCOF9, -1.45% ahead of the contract’s expiration at the end of the session, was down 90 cents, or 1.5%, at $58.61 a barrel. It will end November down nearly 22%. February Brent LCOG9, -1.17% traded at $58.81, down $1.10, or 1.8%.
Both WTI and Brent were poised to suffer their weakest month in about a decade and settle at their lowest levels in 13 months.
Bigger picture, Brent was down about 12% so far this year, as surging oil production in the U.S., Russia and among key members of OPEC has helped to create a glut in global markets. In fact, along the Brent forward price curve prices for future delivery are above those for immediate delivery, a structure known as “contango” — a condition in which the futures price trades above the expected future spot price — which can encourage investors to put oil into storage for later sale.
Russia could hold the key to production after Reuters, citing unnamed industry sources, reported Thursday that the oil powerhouse is increasingly convinced it needs to cut output, though it continues to bargain with Saudi Arabia over the specifics of any coordinated reduction ahead of a meeting of OPEC members and its allies next week.
Meanwhile, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman are expected to meet on the fringes of the Group of 20 summit in Buenos Aires that begins Friday and are likely to attempt to find common ground on production ahead of the meeting of OPEC members and its allies next week.
At the OPEC meeting next week, “oil producers could well decide to cut output by over 1 [million] barrels a day, with Russia also starting to express concern about falling prices,” said Michael Hewson, chief market strategist at CMC Markets UK, in a note. “Even if production is cut, concerns about slowing demand could still weigh on prices.”
In other energy trading, December gasoline RBZ8, -0.60% fell 1.8% to $1.428 a gallon, with the contract looking at a monthly decline of around 18%. December heating oil HOZ8, -1.77% fell 2.2% to $1.803 a gallon, trading nearly 20% lower month to date. The December contracts expire at Friday’s settlement.
The United States Oil Fund LP (USO) was trading at $10.77 per share on Friday morning, down $0.10 (-0.92%). Year-to-date, USO has declined -10.32%, versus a 3.15% rise in the benchmark S&P 500 index during the same period.
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