Prices of oil went down after a meeting of the Organisation of Petroleum Exporting Countries, OPEC+ meeting that had been set for the weekend was delayed, denting traders’ expectations that the cartel will intervene to tighten supplies.
West Texas Intermediate swung in a roughly $4 range to settle above $77 a barrel after the organisation’s gathering was pushed back until next week amid a dispute over output quotas for African members.
Meanwhile, US crude stockpiles rose 8.7 million barrels last week, reaching the highest level since July, adding another headwind for prices.
Wednesday’s declines reflect the market’s concerns of what may happen if OPEC+ can’t reach an agreement, said Rebecca Babin, a senior energy trader at CIBC Private Wealth.
“The market lives in fear of a 2020 outcome,” when the cartel failed to stem a price decline and oil even temporarily went negative, she said. But if quota concerns from African members are the primary cause of delay, the outcome may not deviate from initial forecasts, she said.
Oil pared its losses late in the session after Bloomberg reported the friction with members Angola and Nigeria.
Crude has dropped to three-month lows in recent weeks amid indications supplies are expanding.
Growing production from nations both inside and outside of the Organization of Petroleum Exporting Countries and its allies has complicated the run-up to the meeting.
An upcoming US holiday has also curtailed trading activity, causing heightened volatility.
Key market gauges along the oil futures curve have also been flashing weakness in recent days, countering expectations that supplies would tighten toward the end of the year.
The gap between the nearest two contracts for WTI is in a bearish contango pattern where longer-dated prices command a premium to nearer ones.
That poses an additional challenge for OPEC+ by raising the risk of trend-following funds increasing selling pressure, as contango is usually seen as a bearish signal. Some large oil and cross-commodity exchange-traded funds have also been posting outflows over the last few days.
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