Millennium Post

Oil imports bill to fall as crude prices seen falling below $60

Signalling another set of good news for our government grappling with high fiscal deficit, oil prices could plunge to $60 a barrel if Organization of the Petroleum Exporting Countries (OPEC) does not agree a significant output cut when it meets in Vienna this week, market players say.

Brent crude futures have fallen 34 per cent since June to touch a four-year low of $76.76 a barrel on 14 November, and could tumble further if Organization of the Petroleum Exporting Countries does not agree to cut at least 1 million barrels per day (bpd), commodity fund managers say. ‘The market would question the credibility of OPEC and its influence on global oil markets if there was no cut,’ said Daniel Bathe, of Lupus alpha Commodity Invest Fund. That could send Brent down to around $60, Bathe said. ‘Herding behaviour and a shift to net negative speculative positions should accelerate the price plunge,’ he added.

Fund managers are divided over whether OPEC will reach an agreement on cutting output. Bathe put the likelihood at no more than 50 per cent.

The oil price has been falling since the summer due to abundant supply — partly from US shale oil — and low demand growth, particularly in Europe and Asia.

As a result, some investors believe a small cut —of around 500,000 bpd — would not be enough to calm the markets. Doug King, chief investment officer of RCMA Capital, sees Brent falling to $70, even with a cut of 1 million bpd. If OPEC fails to agree a cut, prices will drop ‘further and quite quickly’, with US crude possibly sliding to $60, he said. US crude closed at $76.51 on Friday, with Brent just above $80.

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