22:47 GMT +307 December 2019
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    Workers rest at Ras Tannura's oil production plant near Dammam in Saudi Arabia's eastern province

    Saudis Raise Doubts About Oil Production Freeze Amid Fears Of 10% Price Dive

    © AFP 2019 / BILAL QABALAN
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    OPEC is supposed to take a final decision about freezing oil output at a November 30 meeting in Vienna, but Saudi Arabia appears to be having second thoughts.

    OPEC's potential failure to agree to restrict oil production could result in an oil price slump of more than ten percent, investment bank Goldman Sachs warned on Tuesday.

    On September 28 the 14 members of OPEC held a meeting in Algiers, where they unexpectedly agreed to cut production for the first time in eight years.

    However, while OPEC agreed to impose an output ceiling, and exempted some members such as Iraq, Iran, Libya and Nigeria, it delayed thrashing out the exact terms of the agreement until its next meeting, in Vienna on November 30.

    In the weeks following the announcement the price of Brent crude rose above $53 per barrel for only the second time this year.

    Over the past two weeks, oil prices have slipped as investors become more doubtful that OPEC, whose production increased to 33.82 million barrels per day in October, will be able to agree on a production freeze. 

    According to data from Marketwatch, futures contracts on Brent crude were trading at $46.66 per barrel on Thursday, a 15 percent decline since October 19.

    In a note for investors dated October 31, Goldman Sachs warned that crude oil prices could crash more than ten percent, to the low $40s per barrel, if OPEC fails to come to an agreement.

    "Even if the fear of such low prices leads OPEC to deliver an agreement on November 30, we reiterate our view that the odds of it succeeding are low," the analysts wrote.

    "The lack of progress on implementing production quotas and the growing discord between OPEC producers suggests a declining probability of reaching a deal," Goldman Sachs said.

    On Tuesday CEO of Saudi Arabia's national oil company Saudi Aramco Amin Nasser added to doubts about the OPEC deal, when he stated Riyadh's view that the oil market may balance without a production freeze.

    "The gap between supply and demand is closing," Nasser told a conference, raising doubts about Riyadh's commitment to imposing a ceiling on oil production.

    "Our anticipation now is that it will be balanced by the first half of 2017 … That will see an adjustment upwards in terms of prices," he said.

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    oil prices, oil, OPEC, Saudi Arabia
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