U.S. Oil Prices Fall Ahead of OPEC Meeting
September 21 2018 - 12:43PM
Dow Jones News
By Sarah McFarlane and Dan Molinski
Oil prices fell Friday after a report indicated major producers
meeting this weekend in Algeria may decide to raise oil production
levels significantly to combat tightening supply.
Light, sweet crude for November delivery was 0.2% lower at
$70.21 a barrel on the New York Mercantile Exchange. Brent crude,
the global benchmark, fell 0.3% to $78.01 a barrel.
A monitoring committee meeting on Sunday between the
Organization of the Petroleum Exporting Countries and nonmembers,
including Russia, is expected to feature discussions around
offsetting lower Iranian exports with production elsewhere. Added
production could have the effect of lowering oil prices, though
much would depend on the size of any output increase.
Oil prices had been rising sharply early Friday morning ahead of
the meeting. But a headline by Reuters, citing unnamed sources,
indicated that OPEC and nonmembers will be discussing another
possible output increase at the meeting, somewhere along the lines
of 500,000 barrels a day.
That 500,000-barrel-a-day level would be just about the amount
that Iran's oil shipments have fallen between April and August
ahead of U.S. oil sanctions that officially begin in November,
according to data from the International Energy Agency.
President Trump inserted Washington's position into the
discussion on Thursday, posting a tweet that said OPEC should stop
constantly pushing for higher oil prices, and demanding that "the
OPEC monopoly must get prices down now!"
U.S. oil prices have risen by $20 a barrel over the past 12
months, helping send the average gasoline prices for drivers in the
U.S. toward a multiyear high of $2.88 a gallon Friday. That is 30
cents a gallon more than this time last year, according to
price-tracking firm GasBuddy
Steward Glickman, head of energy research at CFRA Research, said
such tweet-storms by Mr. Trump on oil prices in advance of the U.S.
midterm elections in November could pressure the Saudis to expand
production. But he said that doesn't mean that the Saudis can or
will do so.
"We are not optimistic that Saudi Arabia will agree to sharply
boost production, even as it owns the lion's share of global spare
capacity, around 60%, per the IEA," Mr. Glickman said before
Friday's report of a possible output increase. "The problem?
Opening up the spigots might not be sustainable and imperil
long-term production capabilities."
Russia and Saudi Arabia already ramped up production this summer
to compensate for some of the lost Iranian barrels, but other
analysts agree that additional production capacity may be
limited.
Goldman Sachs forecast a near-term Brent price of $80 a barrel
in a note, citing strong U.S. demand growth combined with
constrained domestic production, and losses from Iran due to
sanctions.
Later Friday, analysts will be watching for the latest weekly
report by Baker Hughes on U.S. drilling activity. Last week's
report showed the number of active rigs in the U.S. targeting oil
rose by seven to 867, which is a strong rebound after recent
declines. Still, the 867 total remains inside a rather tight,
four-month-old range between 858 and 869 oil rigs, which suggests
overall activity remains subdued.
Among refined products, gasoline futures for October delivery
fell 0.1% to $2.013 a gallon. Diesel futures fell 0.3% to $2.2243 a
gallon.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Dan
Molinski at Dan.Molinski@wsj.com
(END) Dow Jones Newswires
September 21, 2018 12:28 ET (16:28 GMT)
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