Questions over what happens next with OPEC, and threats of violence in member-state Nigeria, left crude oil prices swinging wildly in early Wednesday trading.
Ministers from the Organization of Petroleum Exporting Countries met Wednesday in Vienna ahead of a late-week formal gathering. Member states are considering the status of a market where the balance between supply and demand leaves little room for shocks or geopolitical risk.
Risk factors, from political crises in Venezuela to militancy in Libya, have supported the price of crude oil in recent sessions. Nigerian news agency Today.NG reported the militant group Niger Delta Activists Forum has threatened to launch a campaign against a subsidiary of Italian energy company Eni by Wednesday.
Libya and Nigeria were sidelined from OPEC’s effort to balance an oversupplied market with coordinated production cuts because of national security concerns. The market situation may require additional barrels to stave off a larger spike in crude oil prices.
Crude oil prices were moving between large gains to even in early Wednesday trading. Brent crude oil, the global benchmark for the price of oil, was up 0.59 percent to $75.52 per barrel as of 9:18 a.m. EDT. West Texas Intermediate, the U.S. benchmark, was up 1.26 percent to $65.72 per barrel.
OPEC ministers need to consider risks to supply and political alliances during the meetings this week. Saudi Arabia and Russia have hinted that additional supplies will be put on the market in the second half of the year. Iran, Saudi Arabia’s main political adversary, complained of unilateralism from Riyadh. Meanwhile, the United States, Iran’s opponent and Saudi ally, has weighed in as President Donald Trump remains keen on protecting consumers from higher fuel prices.
Analysis from consultant group Wood Mackenzie laid out three separate scenarios, ranging from a do-nothing policy to an effort to put another 1.5 million barrels per day back on the market. A Goldilocks scenario would keep the price of Brent crude oil closer to $71 per barrel on average for the year.
Ole Hansen, the head of commodity strategy at Danish investment firm Saxo Bank, said in a statement that OPEC members are likely to agree to ease back on compliance in order to put more oil on the market despite internal divisions.
“The price impact should therefore be limited with no producer currently wanting to see their hard work unravel by raising production by more than the market can absorb,” he said.
Oil prices may react later in the day when the U.S. Energy Information Administration produces U.S. inventory data on crude oil and gasoline. The American Petroleum Institute reported late Tuesday that U.S. crude oil stockpiles dropped 3 million barrels last week and gasoline inventories, a loose indicator for demand, increased 2 million barrels.
EIA deviance from API figures would influence crude oil prices in the relative direction.