Will oil prices bounce back?

―Analysts say OPEC meeting key to determining future oil price―

By Lee Kyung-min

The weeks-long bearish sentiment on oil prices could significantly reverse pending the outcome of an upcoming meeting of oil producers in December, analysts said Sunday.

The meeting of the Organization of Petroleum Exporting Countries (OPEC) and 10 non-OPEC partners is scheduled for Dec. 6 in Vienna, Austria.

While the oil price hitting 6-week lows came as a “mixture of multiple negatives,” no additional marked drop is expected for a while, according to an analyst.

“The price dropped partly because OPEC said in November's monthly report that next year's world oil demand would rise by 1.29 million barrels per day,” said Shim Hye-jin, an analyst at Samsung Securities.

This was not only 70,000 barrels per day less than predicted last month but also the fourth consecutive reduction in its forecast.

Another factor, she said, was that Saudi Arabia had no response to a twitter message from U.S. President Donald Trump's who said Nov. 12: “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply.”

“Given OPEC member countries and Russia suggested Nov. 11 that they could cut supplies 2019 citing a predicted glut of oil on world markets, no immediate response to reiterate an earlier stance contributed to the fall,” Shim added.

But the price is not expected to significantly drop any further, given the 6-week low has been enough of falling streak, she said.

“For the price to rise, oil producers should continue with their planned production cuts which will influence the market sentiment accordingly.”

Political uncertainties involving the U.S., Saudi Arabia and Iran will also play into the price change, according to another analyst.

“Despite the recently restored U.S. sanctions on Iran, the diplomatic friction between the U.S. and Saudi Arabia will largely impact oil production as part of the continued hegemony-oriented struggle in the Middle East,” said Seo Tae-jong, an analyst at Korea Investment and Securities.

On Nov.16, WTI Crude Oil closed at 56.46 dollars a barrel, unchanged from a day earlier, while Brent Crude closed at 66.76 dollars a barrel, up 0.21 percent from a day earlier.

While the slight jump in Brent Crude came amid hopes that a coalition of oil producers may seek a production cut at the Dec. 6 meeting, the jump was too small to be considered a breakthrough to reverse falls of the past six weeks.

Oil prices have plummeted since Oct. 2, when the WTI Crude Oil and Brent Crude closed at 75.41 dollars and 84.98 dollars a barrel, respectively, at four-year highs.

At the time, some experts expressed concern that the prices may return to $100 a barrel in the coming weeks, which would pose major risk to the already protracted sluggish Korean economy with sluggish consumer confidence and investor sentiment.