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Oil Breaks Below $60 as Bears Grip Market; OPEC Showdown Next

© Reuters. Oil prices break $60 support.© Reuters. Oil prices break $60 support. – The oil bears vs. OPEC showdown is coming down to the wire. And across crude markets the question almost everyone seems to be asking is: can oil prices go any lower?

On Friday, the world’s leading crude benchmarks fell below key support levels they’ve held for the past seven months at least. U.S. West Texas Intermediate fell under the $60 per barrel support it had maintained since March and and U.K. Brent fell below the $70 level it had latched on to since April.

While both were technically in bear markets — having lost more than 20% of their value from four-year highs hit in early October — WTI also showed a year-to-date loss of nearly 0.5% vs. a gain of 27% just five weeks ago. Brent is still up about 4% or more on the year, although there is no telling what could happen if the selloff in oil, now into its 10th day and one of the biggest consecutive slides since the 1980s, continues.

“The collapse in oil prices has turned into a total bear bath,” said Phil Flynn, analyst at Chicago’s Price Futures Group. “The market ignores the bullish fundamentals and only focuses on bearish things that are yet to come.”

At 12:12 PM ET (17:12 GMT) was down 69 cents, or 1.1%, at $59.98 per barrel, having hit a 9-month low of $59.27 earlier. On Oct. 3, just before the dramatic flip oil prices, it had hit nearly $77.

was off 68 cents, or 0.7%, at $69.97 per barrel, after hitting a 7-month low at $69.15 earlier. Brent’s peak in early October was nearly $87.

The party most aggrieved by the market’s about-turn has to be OPEC. Few of its members would have imagined just weeks ago that prices of crude (which basically determine their national revenue) at these levels, especially with the U.S.-imposed sanctions on Iran, OPEC’s third-largest exporter. Instead of a supply squeeze, the market is betting on oversupply after data this week showing U.S. weekly crude production at a record high of 11.6 million barrels per day.

OPEC Cuts, Yes; But OPEC Break-Up?

A Joint OPEC and Non-OPEC Ministerial Monitoring Committee, which includes Russia, will be meeting this weekend in Abu Dhabi and talk is rife that the group will be cutting production.

Even if the weekend meeting doesn’t yield results, there will be an OPEC conference in Vienna on Dec. 6, where production quotas are usually finalized. Analysts are almost certain that OPEC will intervene to prop up the market at that juncture.

OPEC’s last round of cuts began in January 2017 when oil prices were emerging from the 2014-originated global supply glut that drove WTI down to nearly $25 a barrel. While they were supposed to last until the end of 2018, the group ended the supply reductions earlier when prices began rallying sharply from late 2017.

But even with talk of production cuts making its rounds, The Wall Street Journal reported on Friday that a Saudi government-funded think tank was studying the possible effects on oil markets of a breakup of OPEC, a remarkable research effort for a country that has dominated the oil cartel for nearly 60 years.

The effort coincides with new pressures on the Saudi government, including from the U.S., where President Donald Trump has accused the cartel of pushing up oil prices, and from investors who distanced themselves from the kingdom after the brutal killing of U.S.-based Saudi journalist Jamal Khashoggi, the Journal added.