NEW YORK (BY: MYRA P. SAEFONG, CBS MARKETWATCH) -- Oil prices on Friday tallied a drop of about 22% in November, the biggest monthly percentage loss in a decade as traders fretted over a possible glut in global supplies.
Prices, however, significantly pared much of their early Friday losses as speculation has grown over a potential production cut by major oil producers, ahead of next week’s final meeting of the year for the Organization of the Petroleum Exporting Countries.
Trading action was also held in check ahead of weekend meetings of the Group of 20 in Argentina, where oil talks are expected take place on the sidelines, ahead of an official meeting on Dec. 6 between OPEC and its allies.
Reports Friday, citing comments from a delegate to Bloomberg, said an OPEC committee has suggested a 1.3 million-barrel cut from the October production level.
At the OPEC meeting next week, “oil producers could well decide to cut output by over 1 [million] barrels a day, with Russia also starting to express concern about falling prices,” said Michael Hewson, chief market strategist at CMC Markets UK, in a Friday note. “Even if production is cut, concerns about slowing demand could still weigh on prices.”
On Friday, West Texas Intermediate crude for January delivery CLF9, -1.54% on the New York Mercantile Exchange fell 52 cents, or 1%, to settle at $50.93 a barrel after trading as low as $49.65. The January contract rose about 1% for the week.
However, WTI prices plunged by roughly 22% in November, according to Dow Jones Market Data, after trading at a four-year high as recently as early October. As the downbeat mood takes hold, analysts at Oppenheimer said in a Friday note that they’re cutting their WTI oil price estimate for 2019 by 15%, to $61 a barrel.
Heading into the OPEC meeting, “it wouldn’t be a surprise to see crude prices stabilize, or even recover, as speculation for a cut grows, particularly if the relevant officials continue to strike an optimistic tone,” said Marios Hadjikyriacos, a market analyst with broker XM.
Russia could hold the key to production after Reuters, citing unnamed industry sources, reported Thursday that the oil powerhouse is increasingly convinced it needs to cut output, though it continues to bargain with Saudi Arabia over the specifics of any coordinated reduction ahead of a meeting of OPEC members and its allies next week.
Meanwhile, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman are expected to meet on the fringes of the Group of 20 summit in Buenos Aires that began Friday and are likely to attempt to find common ground on production ahead of the meeting of OPEC members and its allies next week.
For now, the oil market remains divided on the outcome of the OPEC meeting. CME Group’s OPEC Watch Tool pegs the probability of a “small production cut” at 52%, with expectations for “little or no change” at nearly 48%.
Offering a hint on U.S. production activity, Baker Hughes BHGE, -1.25% on Friday reported that the number of active domestic rigs drilling for oil rose by 2 to 887. Separately, the Energy Information Administration said oil U.S. field production of oil fell to 344 million barrels in September from nearly 352 million in August.