Oil prices and related exchange traded funds slipped Friday ahead of an Organization of Petroleum Exporting Countries’ meeting next week as some of the world’s biggest producers hinted at increased output to rein in rising prices.
On Friday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, fell 3.1% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, dropped 3.4% while WTI crude oil futures were 3.0% lower to $64.9 per barrel and Brent crude futures were down 3.5% to $73.3 per barrel.
OPEC, which accounts for 40% of the world’s oil, and other exporters like Russia are ready to release their voluntary production caps, which have helped diminish the global oil glut since early 2017, CNBC reports.
While the original deal is not set to expire until the end of the year, rising crude prices have forced the oil cartel and its allies to consider an early exit from their current plans. The original plan called for OPEC and other producers to withhold 1.8 million barrels perday from the market, but they have been being more proactive in cutting back.
The group and its allies will be meeting in Vienna next week to discuss potential changes.
“The decisions that are going to be made in Vienna are going to be more geopolitical this time than normal,” Dan Yergin, vice chairman of IHS Markit, told CNBC.
OPEC Meeting Concerns
There are concerns that the meeting could breakdown, similar to what happened back in June 2011 when members left Vienna without an agreement in place. Saudi Arabi and Russia have spare capacity to pump out more to take advantage of the current oil market, but other producers, such as Venezuela and Iran, want to maintain current prices to bolster their economy in face of domestic issues.
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“Nonetheless, we could envision a scenario where the meeting proves to be so antagonistic because of deep divisions over production and sanctions that they fail to reach a consensus, leaving big producers like Saudi Arabia and Russia to act on their own,” RBC said in a research note.
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