Crude oil prices are getting geared up for the OPEC/Non-OPEC meeting in Vienna, Austria. At this meeting it is widely expected that the players involved will extend cuts throughout the rest of next year, despite some lingering geo-political and shale oil concerns. This meeting comes as oil prices pull back from a two-and-a-half-year high and global supply is tightening.
Some are concerned that the rising tensions between Saudi Arabia and Iran could derail a deal but that is not likely to happen. Both countries need high oil prices right now and the Iranians can’t really ramp up production very much anyway. They seem to have a common bound when it comes to high oil prices.
The Russian oil companies are crying poor as they watch some of their market share get eclipsed by U.S. oil exports, but despite those concerns the Russians are already laying the groundwork for the production cut extension. Reuters reported that Russian Energy Minister Alexander Novak said that Russia would discuss the details of an extension on , but made no mention of how long this should last beyond its March expiration.
Bloomberg News reported that: "Global oil demand is a critical factor that will be at the top of minds when OPEC and non-OPEC members discuss their next policy moves. The main driver of oil prices in recent months has been the strong and improving outlook for global growth. The International Monetary Fund has revised up its global growth outlook, and euro zone and U.S. manufacturing PMIs have been on a tear. There have also been important improvements in China, where the Caixin manufacturing PMI has shown an impressive rebound from a manufacturing recession between December 2014 and June 2016.”
Yet, at the same time the market is showing concern about a big drop in Chinese stocks. China stocks dropped again today, sending the benchmark Hang Seng index gauge to its lowest level . Oil traders are a bit worried about this market shake up as it was a drop in Chines stocks two years ago that caused oil to crash to $26 a barrel area. While we seem to be on more solid footing, the trade is taking some profits early.