Oil futures are continuing their losing streak for a sixth day amid concerns that OPEC is anything but united in implementing a plan to cut production across the 14-nation cartel.
Brent crude futures were down 17 cents on the London ICE futures exchange by midday to $46.18. West Texas Intermediate was at $44.61, down two cents. Oliver Jacob or the energy consultancy Petromax said "prices are starting to reach oversold levels."
In the run-up to a November 30 meeting, OPEC officials in Vienna this week failed to work out the preliminary details of production cuts. The Saudis threatened to throw a spanner in the works by raising output if Iran did not cut its own production OPEC sources told Reuters on Friday. OPEC expressed confidence that it would get the cuts done in a statement on Thursday.
OPEC agreed to an output cap between 32.5 million to 33 million barrels per day in late September talks in Algeria. But those caps were preliminary and production quotas for individual nations won't be hammered out until the November meeting--and there's the rub.
There have been signs that Iran, Iraq, Libya and Nigeria might not take part in the cuts. If other countries follow suit, participants at the November 30 confab could walk away from the bargaining table empty handed. Last month Igor Sechin, head of Russia's state-owned oil company, Rosneft, said they would not honor any OPEC production cuts unless there was a price freeze.
Russia and Saudi Arabia are the world's biggest oil producers, each accounting for 12% of the global oil production, followed by the United States (11%) and China and Canada, with about 5% respectively.
An influence going forward could be the IPO of Saudi Arabia's Aramco IPO, expected to be the biggest ever with the initial price potentially hitting $50 a share. Foreign investors will be allowed to buy. Although a listing is not expected until 2018, a failure to launch at that price could further depress oil prices and contribute to a volatile climate.
Analysts said the market was getting an added shot of volatility as traders pulled money out of the oil futures marked in advance of the U.S. presidential election on Tuesday. Even without the election, U.S. crude stocks were spiking while demand continued to be low. Stateside stockpiles hit 14 million barrels last week, the biggest-ever backlog on record as the U.S. rig count rose by nine on Friday to 450 after a dip the previous week--the first in four months.