Oil prices could collapse into the $30s if OPEC doesn’t keep its act together.
OPEC will meet in Kuwait Sunday. A handful of OPEC and other oil producers are expected to put a happy face on their production agreement. However, they will not be oblivious to the danger that oil prices could collapse.
That meeting should help support oil prices. Even so, oil prices have plunged 10 percent since investors began to doubt the deal earlier this month. The international benchmark Brent crude has fallen below the psychological $50 level.
Six months ago the parties agreed to remove 1.8 million barrels a day from the market. And representatives of the five monitoring countries this weekend are expected to review where producers stand on compliance. Also, the president of OPEC, Saudi Energy Minister Khalid Al-Falih is expected to attend. As will representatives from the five members of the monitoring committee, Kuwait, Algeria, Venezuela, and non-OPEC nations Russia and Oman.
Most noteworthy, “without the production cut agreement, I think you could basically target the low-to-mid $30s.” This according to Gene McGillian, manager market research at Tradition Energy. “The Saudis need the revenues from higher oil prices. They know that prices at $30 to $35 are trouble for them.”