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Want to play along as the oil market tries to guess what OPEC will do at its Friday meeting?
West Texas Intermediate moved down, slightly, to $49.56 a barrel, a 0.7% retreat, as of 3 p.m. New York time. International benchmark Brent moved 0.52% lower to $55.19 a barrel.
The question is What’s priced into this market?
OPEC oil and non-OPEC oil ministers meet in Vienna on Friday. On the agenda are the possibility of extending the current level of production cuts beyond the first quarter of 2018. And the possibility of making those cuts deeper.
My “guess” is that the move above $50 a barrel on U.S. benchmark West Texas Intermediate is pricing in an extension of the cuts of maybe another six months. I think achieving even that will be a stretch since a number of OPEC governments are feeling deep pain from the combination of lower production and lower prices, but there’s still a good chance that the cuts get extended if only because OPEC doesn’t have another solution to the global supply excess.
My “guess” is also that a decision to make the cuts to production deeper is regarded as unlikely by the market (I’d have to say I agree) and that therefore any announcement of deeper cuts would send oil prices higher.
On the other side, if the meeting breaks up without a decision to extend the cuts, I think that would be a significant disappointment to the market.
We get the latest report on U.S. oil inventories on Thursday morning from the U.S. Energy Information Administration.