Because of unstable trading last Friday, oil price has dropped again and ended the week at lower prices, cutting short their two week gains. The market reacted to frenzied rumors that the biggest oil producers will strike a deal leading to a global oil glut.
After an unpredictable week of trading, there is much speculation on the result of the Sunday meeting between the world's two largest oil producers. Ali al-Naimi, Saudi Arabian oil minister will meet with Eulogio Del Pino, Venezuelan oil minister in Riyadh. But before that, Del Pino will also discuss the same matters with the Omani and the Qatari ministers.
Cash-strapped Venezuela is trying to get the consensus of the three oil producing nations, all members of the Organization of the Petroleum Exporting Countries, to increase the price of oil. According to Tim Evans, an energy futures specialist at Citi Futures, the meeting on Sunday will be 'make or break' for a future deal.
Adding to the volatility of the situation and to the unstable directions that the oil price experienced this week was the surprise $600 million liquidation of leveraged fund bet on plunging oil prices.
There are other contradicting indicators that investors were also considering on Friday as the dollar DXY improved and gained its lost ground in the last two days, while other investors continued to worry about the increasing oil glut, considering that U.S. inventories were reporting record highs the past week even with reports that the world's economy is slowing down.
The twin factors of weak oil demand in many countries, that is, weak economic growth together combined with increasing oil glut because of over production seems to be the reasons for this change.
In relation to this, for every dollar drop in the oil price, Russia loses around $2 billion in revenues. Despite that, this country has confirmed that it will not cut its oil production, just to increase oil prices.
It is apparent that to arrive at a long-term solution, the Russian approach could also be included in the agenda of the OPEC ministers' meeting.
