- A 6% slump on Friday night saw futures contracts for brent crude oil close below $US60 a barrel for the first time since October 2017.
- OPEC and its allies are scheduled to meet on December 6, where production cuts will be on the agenda.
- However, CBA analyst Vivek Dhar said a coordinated deal to reduce supply is far from guaranteed.
Oil prices were the main talking point on markets to end the week, as prices for brent crude — the global benchmark — slumped by another 6%.
The latest fall saw front-month brent crude futures close below $US60 a barrel for the first time since October last year:
CBA commodities analyst Vivek Dhar attributed Friday’s plunge to comments from Saudi Arabia’s energy minister, who said the kingdom was on track to produce a record amount of oil this month.
Brent prices are now down more than 30% from their October 2018 peak, as markets respond to a drastic shift in the supply/demand outlook.
In addition, “growing US oil stockpiles also weighed on prices”, Dhar said.
Following a 16.5% increase in US production this year, the US energy bureau expects a further increase of 10.6% next year to 12.6 million barrels per day.
Mirroring a similar fall in brent crude, US West Texas Intermediate (WTI) crude has fallen by more than 30%.
All eyes will now be on the next meeting of OPEC member states and allied producers (including Russia) on December 6.
Another round of production cuts is on the table, but Dhar said achieving consensus may be difficult.
“We expect a decision to curtail around 1% of global supply to be made,” he said.
“However, Russia’s reluctance to cut production and a US-Saudi Arabia relationship complicated by the killing of journalist Jamal Khashoggi, could still see a deal to cut global supply fall through.”
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