Crude oil slides below $80 a barrel as producers argue
The oil producing group Opec+ delayed a ministerial meeting expected to discuss oil output cuts as producers struggled to agree on production levels and hence possible reductions, a surprise delay that sent oil prices sliding.
Sunday's meeting of the Organisation of the Petroleum Exporting Countries and allies such as Russia, known as Opec+, had been expected to consider further changes to a deal that already limits supply into 2024, according to analysts and Opec+ sources.
"Uncertainty is never good for financial markets, with markets now having to wait longer to get clarity what Opec+ does next year," said UBS analyst Giovanni Staunovo. "The postponement of the meeting also shows there are some different views among the group participants."
The price of Brent crude slid at one stage by $3 a barrel, or almost 4%, to $79 a barrel. The price has fallen from near $98 in late September, pressured by rising supplies and concern about demand and a potential economic slowdown.
Wednesday’s declines reflect the market’s concerns of what may happen if Opec+ can’t reach an agreement, said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “The market lives in fear of a 2020 outcome,” when the cartel failed to stem a price decline and oil even temporarily went negative, she said.
The Sunday meeting had been expected to convene in Opec's Vienna headquarters. Opec announced the delay in a statement which didn't mention if the group would convene online or in person on Nov. 30, although three delegates said it was expected to be in person in Vienna.
Saudi Arabia, Russia and other Opec+ members have already pledged oil output cuts of about 5 million barrels per day, or about 5% of daily global demand, in a series of steps that started in late 2022.
Sharp fall in crude oil prices, if sustained for a number f weeks, could help slow the pace of inflation in the eurozone and elsewhere.
European Central Bank vice president Luis de Guindos said investors may not be fully pricing the risk of a stronger hit to the eurozone economy following a year of interest-rate hikes and rising political tensions.
Further trouble in the Middle East is just one example of how geopolitics could yet upend hopes for a so-called soft landing where inflation is tamed without a major recession, Mr Guindos said.
The eurozone is teetering on the edge of a mild downturn, with output having shrunk by 0.1% in the third quarter. It looks like borrowing costs have peaked, though, with the ECB holding fire last month after an unprecedented run of 10 straight hikes.
The European Commission said last week that the eurozone will probably avoid a recession as improving purchasing power among consumers drives a modest rebound.
On Wednesday, the EU said that consumer confidence picked up in November, but "still scores well below its long-term average" that goes all the way back to 2007
The early or "flash" indicator covers all of the EU, except for Ireland and Romania.
- Reuters, Bloomberg, Irish Examiner
