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Oil slides as OPEC meeting delay raises production cut uncertainty

Oil prices fell as much as 4% on Wednesday after OPEC+, a consortium of the world's largest oil producers led by Saudi Arabia, announced it would push back its upcoming meeting to Nov. 30 from Nov. 26, raising uncertainty about the group's plans for additional output cuts.

"They [OPEC] do like to have consensus before they see each other," Ed Hirs, senior fellow at the University of Houston, told Yahoo Finance on Wednesday morning.

West Texas Intermediate (CL=F) futures fell as much as 5% but regained most of those losses to close the session down almost 1% at $77.10 per barrel, Brent (BZ=F) crude, the international benchmark price, ended the session fractionally lower at $81.96.

The announced delay could be a sign that member countries are not in sync about their next steps.

"I think this means they are having a hard time getting everyone to buy in to the notion of more cuts across the board," Stewart Glickman, energy equity analyst at CFRA Research, told Yahoo Finance on Wednesday regarding the delay.

Saudi Arabia, which has unilateral reductions in place of one million barrels per day through year-end, is reportedly pressuring smaller OPEC+ members to take a bigger part in reductions.

"The dissension among the members of OPEC+ is there. And that dissension stems from...some of the members not wanting to continue cuts because they want to get some of their market share back," Scott Bauer, CEO of Prosper Trading Academy told Yahoo Finance.

"The market is looking at that — saying you know what maybe there are members here who want to pull back on those cuts," he added.

This year's cuts are aimed at constraining global supply and keeping a floor under oil prices, which are down about 20% from the average price that prevailed in 2022.

"We see some scope for the group to do a deeper reduction, but we would anticipate that Saudi Arabia would seek additional barrels from other members to share the burden of the adjustment," wrote Helima Croft, head of global commodity strategy at RBC Capital, in a note this week.

Market fundamentals may also be contributing to uncertainty among OPEC+ members after a bearish oil market outlook was presented to the group this week. The materials from a top financial dealer reviewed by Reuters show November's recent sell-off was prompted by downbeat sentiment from oil producers and airlines.

"Raising the price in the face of softening demand could knock down demand further, resulting [in] lower prices regardless," noted the University of Houston's Hirs.

On Wednesday, government data showed US inventories rose by 8.7 million barrels last week to their highest level since July 21.

CALGARY, CANADA - SEPTEMBER 18: Saudi Energy Minister Prince Abdulaziz bin Salman speaks on the second day of the 24th World Petroleum Congress, at the Big 4 Building at Stampede Park, on September 18, 2023, in Calgary, Canada. The Congress, organized by the UK-based charity WPC with UN NGO accreditation, focuses on oil, gas, and energy sustainability and is renowned as the world's premier forum in this field. (Photo by Artur Widak/Anadolu Agency via Getty Images)
Saudi Energy Minister Prince Abdulaziz bin Salman speaks on the second day of the 24th World Petroleum Congress, at the Big 4 Building at Stampede Park, on Sept. 18, 2023, in Calgary, Canada. (Artur Widak/Anadolu Agency via Getty Images) (Anadolu via Getty Images)

A "rollover of cuts and voluntary cuts will send the market south, for the current level of supply clamp is not enough to persuade the market that it is 'tight,'" PVM oil broker John Evans said in a recent note. Wednesday's price reaction signaled skepticism that deeper cuts to output will materialize in 2024.

Crude oil prices are down roughly 18% from 2023 highs reached in late September amid concerns of slowing demand and increasing supply.

On Tuesday, US senior adviser for energy Amos Hochstein told Yahoo Finance the Biden administration has been in "close touch" with oil producers, both in the US and abroad, including the Middle East.

"We understand their concerns," Hochstein said, "but I think that increasingly they understand that high oil prices are bad for American and global consumers. It's bad for economic growth, and ultimately it's bad for them as well."

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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