While the focal point of markets over the last week or so may have been the US election, investors could have missed the situation unfolding in Crude oil markets. With many beginning to doubt whether OPEC’s provisional production output cap agreement in Algiers is plausible, reports emerged on Friday stating that Saudi Arabia has threatened to steeply raise its oil output in reaction to Iran’s refusal to cap its output.

This comes less than 24 hours after OPEC, the cartel in which the Saudis act as the de facto leader, released a punishing statement to industry observers that inaccurately predict the future of their policies.

How right those observers were.

Crude oil prices have collapsed from their highs reached following the Algerian agreement. US crude has fallen from $52 only a month ago to just around $44 at mid-afternoon on Friday. Six consecutive negative sessions have pared all gains made since September 23, whilst the outlook for any recovery in the near future doesn’t seem any brighter.

OPEC and non-OPEC producers, most notably output record breaking Russia, meet in Vienna on November 30. The provisional agreement reached in Algiers was agreed to on the belief that this month’s meeting the cap was negotiated and finalised, and crude would finally receive the boost that state producers and industry companies alike so desperately crave.

Yet the probability that this will actually take place is looking increasingly unlikely. Iran continues to ramp up production; Iraq wants to be excluded from any production cut while it fights ISIS; whilst today’s Saudi Arabian reports put the icing on a fruitless cake.

UK oil companies are subsequently feeling the squeeze. BP’s share price is verging on closing the week 10% lower, whilst Tullow Oil is down over 11.5%. Some analysts are assuming the worst and asking whether a price below $40 is sustainable. But perhaps this is the makings of an opportunity rather than dark clouds forming.

In the days preceding the Algiers, markets became increasingly pessimistic. However, come the September 23, OPEC reached the surprise agreement; an ‘I told you so’ moment that the likes of BP and Tullow will be hoping can be repeated in just over three weeks’ time. In which case, some investors might be on the lookout for bargains in the coming weeks.

Only time will tell whether the world’s largest (and most unpredictable) cartel will reach an agreement to put a floor in crude oil prices. Until then, our traders here at Accendo Markets are here to help get the latest crude oil news to you as soon as it breaks.

Not only that, but our research team continues to be quoted in the international press, providing insight into the current state of market affairs. You too can utilise their insight by signing up here to receive the very same information straight to your inbox.  Why not save yourself time and effort now?

Craig Slight, Trader, November 4