NEW YORK (TheStreet) -- Crude oil prices dipped into negative territory Monday in anticipation that key oil-exporting countries will decide to increase production later this week.
Light sweet crude oil for July delivery fell $1.21 to settle at $99.01 a barrel and the July Brent crude contract was falling $1.51 to $114.33.
Following a spate of poor U.S. economic data last week and subsequent concerns about the stagnation of the global recovery, there is mounting pressure on the Organization of the Petroleum Exporting Countries to raise production quotas at its June 8 regular meeting in Vienna, Austria.
"The weak U.S. figures should increase the pressure on OPEC to raise production quotas at its meeting in Vienna on Wednesday," said Commerzbank analyst Carsten Fritsch. "The International Energy Agency again urged OPEC on Friday to increase its oil production."Fritsch said speculators appear to be expecting an increase in production quotas, as net long positions in crude oil fell by 7,100 contracts in the week ending May 31 and are now at their lowest level in three and a half months, at 205,827 contracts. Oil ministers have been divided on the question of whether to raise production quotas this Wednesday. Talks are likely to be heated, in no small part because of their opposing stances on Libya's violent political quandary. OPEC members Qatar, Kuwait and the United Arab Emirates are backing rebel forces in their fight to overthrow Libyan leader Moammar Gadhafi. The market impact of the turmoil in Libya, the world's 12th-largest oil exporter, is estimated to be a net loss of 1.3 million barrels a day in oil. A senior OPEC delegate said the cartel likely will hike output limits Wednesday in response to greater demand in the second half of the year, Dow Jones Newswires reported. OPEC previously said it saw the need to hike production to 29.9 million barrels a day this year to meet China's red hot demand. "Consensus last week was that there would be no change to the official quota; however, rhetoric over the weekend from an OPEC delegate has put a cat amongst the pigeons somewhat," said Summit Energy's commodity analyst Matt Smith. "Given that Saudi Arabia believes the market is well supplied, I still lean to the side of no change to the quota; OPEC can always increase production regardless if they see the need." Oil services companies were falling. Halliburton (HAL) was down 4.6% to $47.95 midday Monday, Schlumberger (SLB) was lower by 2.5% at $82.89, Baker Hughes (BHI) was falling by 3.3% to $72.14, Newpark Resources (NR) was tumbling 5% to $8.72, Tesco (TESO) was lower by 4.4% at $19.04 and Flotek Industries (FTK) was dropping 6.2% to $7.99. -- Written by Andrea Tse in New York.
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