Oil Prices Drop After OPEC Delays Production-Cut Decision
By Dan Molinski
--Oil prices slid Thursday after OPEC ended a key meeting without setting levels for production cuts, putting off the decision instead until Friday.
--Light, sweet crude for January delivery ended 2.6% lower at $51.49 a barrel on the New York Mercantile Exchange. Prices were briefly down 5% at an intraday low of $50.08.
--Brent, the global benchmark, closed 2.4% lower at $60.06 a barrel on London's Intercontinental Exchange.
OPEC: The Organization of the Petroleum Exporting Countries concluded its meeting with a tentative agreement that production cuts are needed, but the group will wait to hear from Russia on Friday before making a final decision on the exact amount to cut to address falling oil prices. Delegates said they are considering output cuts of as much as 1 million barrels a day. OPEC and major producers like Russia are under pressure to support prices, which have fallen by more than 30% since a multiyear high in October.
Global Markets: Declines in stock markets around the world added pressure to oil prices. The arrest of a high-profile Chinese executive in Canada hit stocks from Asia to Europe, as investors worried that there would be another escalation in tensions between the world's two largest economies. The Dow Jones Industrial Average slid 1.5% while the S&P 500 lost 1.3%.
U.S. Supplies: A weekly report released Thursday from the Energy Information Administration was unexpectedly bullish, showing that U.S. crude oil inventories fell by 7.3 million barrels last week, ending 10 straight weeks of increases. "The report is bullish due to the large draws in crude oil and total petroleum stocks," said analysts at Drillinginfo.
Party Over for Oil Cartel: Some analysts said OPEC's decision to essentially not make a decision until after it meets with Russia and other producers Friday is a worrisome signal that the organization is losing clout and its ability to keep the market on track. Kyle Cooper, a consultant for ION Energy, said that after Thursday's oil selloff, OPEC and Russia are a position in which "they've got to announce cuts of at least 1.3 [million barrels a day] to 1.5 to get any sort of bounce in prices." But even that, he said, may not be enough if they say they are going to make those cuts from current high levels. "The market is placing less and less confidence in OPEC," Mr. Cooper says.
--An OPEC meeting including non-OPEC countries is set to take place Friday.
--The Baker Hughes weekly oil-rig-count is released at 1 p.m. EST Friday.
Write to Dan Molinski at firstname.lastname@example.org