MABUX: Bunker prices slide to continue if OPEC output target remains unchanged
The Bunker Review is contributed by Marine Bunker Exchange
Oil prices tumbled more than 4 percent on Wednesday as surging U.S. stockpiles and a rallying dollar prompted traders to dump crude contracts amid signs the world’s largest oil producers will not cut production when they meet this week.
The Oil Future market closed Wednesday evening - Brent settled down $1.95, or 4.4 percent, at $42.49 a barrel. WTI finished the session down $1.91, or 4.6 percent, at $39.94.
The majority of OPEC members would agree to a reduction in crude production at Friday’s meeting, with the exception of Saudi Arabia and the Persian Gulf Arab countries, Shana reported, citing Mehdi Asali, director general of OPEC and energy forums at the Iranian Ministry of Petroleum.
Under current international conditions between Iran and certain Persian Gulf littoral states, it is unlikely that these countries voluntarily cut their output.
One challenge facing the Organization of Petroleum Exporting Countries as ministers gather in Vienna for their bi-annual meeting is lack of agreement over how to manage supply and stabilize the oil market. The group needs to reach a consensus among all members before it can change its output target, currently set at 30 million barrels a day.
OPEC, which produces about 40 percent of the world’s oil, has pumped above its collective quota for 18 months.
Member states Venezuela, Iran, Iraq, and Ecuador have all called for a cut in production to bolster prices. Yet Iran plans to boost its own output should sanctions be lifted early next year.
Some traders said the market could be volatile for the rest of the week and that short covering could occur as Brent and WTI both approach technically oversold levels. The market is vulnerable to short covering spikes if anything unexpected on OPEC comes out, if not the WTI will start trading below $40 a barrel. The WTI futures hit contract lows after government data showed a 10th straight week in crude builds. Do not think this downward trend can persist much longer. OPEC is widely expected to leave its target unchanged at December 4th meeting. We will see on Friday!!
If OPEC stick to its present policy bunker prices will continue its downward trend.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)