Oil price: Brent falls for second day as OPEC considers options

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on Nov 25, 2014
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iNVEZZ.com, Tuesday, November 25: The price of Brent crude oil futures has fallen so far in today’s trading session as speculation continued to increase ahead of an OPEC meeting later this week. The 12-member group has considered exempting members from any potential output cuts, Bloomberg has reported.
Brent futures for January delivery had shed 45 cents, or 0.61 percent, to $79.19 as of 08:20 GMT on the London-based ICE Futures Europe exchange. The contract fell over one percent during the previous session following news that Iran and world powers extended negotiations over the country’s nuclear programme until 1 July, 2015.
“Vienna will be the capital of oil headlines throughout the week but the outcome both of the nuclear negotiations and OPEC are hard to predict,” said Olivier Jakob, managing director of Zug, Switzerland-based researcher Petromatrix GmbH, prior to the announcement as cited Bloomberg. “The result of the OPEC meeting is dependent on the result of the Iran negotiations,” meaning that an extension of talks may also result in OPEC delaying its decision.

With negotiations over Iran’s nuclear programme being extended, markets have now shifted their focus back to Thursday’s OPEC meeting.
Citi Futures analyst Tim Evans was quoted by the Wall Street Journal as saying that the outline of a potential agreement to reduce output was becoming a bit clearer, with smaller oil producers such as Iran, Iraq and Libya likely to be excluded from any production cuts.
Bloomberg cited two people, who asked not to be identified in line with their national policies, who said that one of the proposals currently discussed was for Iraq, Iran and Libya to be exempt from any potential decrease in output as they were pumping below potential.
According to Evans, a bullish scenario of production cuts would push oil prices back up to the $90-$95 range, while other more bearish scenarios where no cuts are undertaken could push oil prices into the $50-$60 range.
In his view, the concern over the potential bearish scenario should provide sufficient incentive for the group to take at least some action at this week’s meeting, but he remained open to any sort of development.
“The rapid growth now being achieved in non-OPEC production means it faces the risk that even a large cut to supply may not be enough to support prices and could simply result in lost market share and revenue,” Barclays said as reported by Reuters.
January WTI futures had declined 0.26 percent, or 20 cents, to $75.58 in electronic trading on the NYMEX in New York as of 08:20 GMT. Tomorrow’s US crude stockpiles report by the Energy Information Administration is expected to be overshadowed by speculation on the eve of the OPEC meeting. IG reports forecasts that inventories expanded 3.1 million barrels in the week ended 21 November.
Based on the two front month contracts, Brent was trading at a premium of $3.61 to WTI as of 08:20 GMT, down over 10 percent from yesterday’s $4.03 close.

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