Some commodity fund managers believe oil prices could slide to $60 per barrel if OPEC does not agree to a significant output cut when it meets in Vienna this week. As Reuters reports, Brent crude futures have fallen by a third since June, touching a four-year low of $76.76 a barrel on Nov. 14.
They could tumble further if OPEC does not agree to cut at least one million barrels per day, according to some commodity fund managers’ forecasts.
“The market would question the credibility of OPEC and its influence on global oil markets if there was no cut,” says Daniel Bathe, of Lupus Alpha Commodity Invest Fund.
That could send Brent down to around $60, Bathe says.
“Herding behavior and a shift to net negative speculative positions should accelerate the price plunge,” he adds.
Yet fund managers and brokerage analysts are divided over whether OPEC will reach an agreement on cutting output. Bathe puts the likelihood at no more than 50%. Oil prices have been falling since the summer due to abundant supply, partly from U.S. shale oil, and because of low demand growth, particularly in Europe and Asia. As a result, some investors believe a small cut of around 500,000 bpd would not be enough to calm the markets.
Doug King, chief investment officer of RCMA Capital, sees Brent falling to $70 per barrel even with a cut of one million bpd.
“With this, I would expect lower prices in the first half of 2015,” he says.
If OPEC fails to agree to a cut, prices will drop “further and quite quickly,” with U.S. crude possibly sliding to $60, he says. Read the full story.
