Wednesday saw oil prices drop in Asia is OPEC (Organization of the Petroleum Exporting Countries) prepared for a meeting in Vienna, amid speculation that output levels will remain high.
The West Texas Intermediate, considered to be the benchmark in the US, dropped $.26 in January to $41.59. During the same month, Brent crude dropped eighteen cents to $44.26 per barrel.
Friday will see traders closely monitoring the OPEC meeting to find out whether the organization will decrease output, which currently exceeds more than 31 million barrels a day.
Even a little decrease in production could help ease the glut of global crude supply that has been bringing prices down for over a year.
Analysts anticipate that OPEC will maintain production levels due to the influence of Saudi Arabia and other oil producing countries in the Gulf.
In November last year, OPEC’s decision to maintain output levels caused oil prices to plunge by more than $100 a barrel in 2014.
According to IHS Energy, Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates account for the majority of OPEC’s 31.5 million barrels per day output, and make it impossible for the rest of the organization to force them to reduce output.
“Without the Gulf group, there can be no effective OPEC agreement,” it said.
Iran is expected to declare intentions to increase exports as soon as Western sanctions are eased under a landmark agreement to curb Tehran’s nuclear program.
Abbas Araghchi, Deputy Foreign Minister of Iran, indicated last week that the country anticipates the deal becoming effective in early January, at which point Tehran will have effected its commitments.
Saudi Arabia in particular is unlikely to reduce output that its primary competitor could fill if sanctions are listed.
Traders are also monitoring reports that US commercial crude inventories could be released in order to gauge demand the top oil consuming country.
[Featured image credit: “Pumping for Oil” by Farhan Amoor, used under CC BY / Color filters added, image cropped]