Oil prices fall as nervous market eyes OPEC meeting

Oil prices fell on Tuesday on market jitters over whether producer cartel OPEC will be able to hammer out a meaningful output cut during a meeting on Wednesday aimed at reining in a global supply overhang and propping up prices.

Brent crude futures LCOc1 were trading at $47.80 per barrel at 0546 GMT, down 44 cents, or 0.9 percent, from their last close.

U.S. West Texas Intermediate crude futures CLc1 were down 42 cents, or 0.9 percent, at $46.66 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) is meeting officially in Vienna on Wednesday to discuss a planned production cut in an effort to curb overproduction that has dogged markets and more than halved prices since 2014.

With a high degree of uncertainty going into the last 24 hours before the meeting, traders said there was a high chance of sudden price swings based on news headlines coming out of Vienna.

“I still think they need to do a deal even though my confidence has dropped back to coin toss levels,” said Greg McKenna, chief market strategist at Australian brokerage AxiTrader.

Intense negotiations would be needed on Wednesday to cement a deal, Goldman Sachs (GS.N) said in a note to clients.

“The latest headlines suggest that while there is a broad agreement on the rationale for a cut, political considerations and country level quota negotiations are so far preventing a deal from being reached,” the note said.

There remains disagreement among OPEC members over which producers should cut by how much, and a plan for non-OPEC oil giant Russia to participate has so far also failed.

If OPEC agreed a production cut to 32.5 million barrels per day (bpd), down from 33.82 million bpd in October, crude prices would likely rise to the low $50s per barrel, Goldman said.

“If no deal is reached, our expectation of rising (crude) inventories through 1H2017 would warrant prices averaging $45 per barrel through next summer,” the bank said.

However, the “price risk is likely skewed to the upside heading into Wednesday,” it added, saying a move to below $40 per barrel would be difficult to sustain.

On the demand side, South Korea’s crude imports rose 3.9 percent in the third quarter of 2016 from a year earlier, as oil consumption climbed thanks to low oil prices.

The world’s fifth-largest crude importer shipped in 270.4 million barrels of crude oil in the July-September period, compared with 260.3 million barrels in the same period in 2015, its energy ministry said on Tuesday.