Oil prices were lower this morning as the 15-nation Organisation of Petroleum Exporting Countries (OPEC) held crunch talks in Vienna.
The issue at hand is whether OPEC and its allies among other oil-producing nations can agree on a package of cuts to support the oil price.
A deal struck last year to restrain output runs out at the end of the year. While it was initially successful in bolstering crude prices, a decline set in from early October as oil supply, in general, has increased and there has been uncertainty as to what will replace the deal after 31 December.
Dramatic effect on price
crude, a benchmark used in international contracts, was 1.2% lower this morning at $60.82. The US benchmark, lost 1.425 to $52.14.
The deal struck a year ago between OPEC and the NOPEC countries cut about 1.8 million barrels a day out of global oil production. This had a dramatic effect on the Brent price, which rose from $45.54 a barrel on 23 June last year to a peak of $86.29 on 3 October this year.
But, then began a price collapse that took it to $58.76 on 28 November, since when it has made a modest recovery.
Hard to spot trading ranges
Observers suggest Saudi Arabia, the effective leader of OPEC, wants production curbs amounting to at least 1.3 million barrels a day to be agreed, but reports suggest Russia is resisting curbs of this type. Meanwhile, President Donald Trump has called on OPEC not to restrict supplies.
In a tweet on Wednesday, President Trump wrote: “Hopefully OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices.”
Over a five-year period, the oil price has been remarkably volatile, buffeted by the aftershocks of the Great Recession, talk of flagging Chinese demand, and the boom in US shale oil. Brent peaked at $114.81 a barrel on 20 June 2014 and reached a five-year low of $28.94 on 15 January 2016.
Global oil supply and demand are quite finely balanced. According to the International Energy Agency, demand in the third quarter of this year was 99.84 million barrels a day while supply totalled 100.74 million barrels a day. This tight demand-supply position means even relatively small changes on either side of the equation can trigger sharp price movements.