Last week the Organization of the Petroleum Exporting Countries (OPEC) failed to agree on an output target to reduce the oil glut, which caused the prices decline by over 60 percent since 2014, Joinfo.ua reports with the reference to Reuters.
Expecting the OPEC decision, investors were ready to pay more to protect against a surprise rally in the price, than a surprise fall. But now they chose the contract’s option, which gives the holder the right to sell crude oil futures at just $35 a barrel.
“Oil is going to make lower lows and lower highs for the foreseeable future and, in terms of market reaction post-OPEC, I’m not surprised, but it does leave the door open for prices to fall,” Gain Capital analyst Fawad Razaqzada said.
Recently, the U.S. crude for December 2022 delivery and onward was trading slightly above $60 per barrel, but following the OPEC meeting, contracts out to December 2024 are below $60, trading data shows.
“It means that there is a loss of confidence in the market after OPEC, and people expect low prices to last longer”, said Oystein Berentsen, managing director of crude oil at Strong Petroleum in Singapore.
Goldman Sachs said after the OPEC-meeting that it expected oil prices to remain “lower for longer,” with a risk that oil prices could fall as low as $20 per barrel.