US crude oil prices remain weak ahead of OPEC meeting

US crude was trading at $41.68 per barrel, virtually flat from its last settlement and down more than 10% since the start of November

Crude oil prices held at low levels in early trading in Asia on Tuesday as traders bet on continued high production from the Organization of the Petroleum Exporting Countries (OPEC) ahead of its meeting later this week.

US crude was trading at $41.68 per barrel at 0000 GMT on Tuesday, virtually flat from its last settlement and down more than 10% since the start of November.

"The focus for markets this week will be the 168th OPEC Conference on Friday and US crude oil inventories. The market will now be expecting crude oil stocks to decline through to the end of the year, in line with seasonal patterns. A failure to do so could see WTI crude fall through $40 per barrel in coming weeks," ANZ said on Tuesday.

 

On OPEC policy, which is heavily influenced by its biggest producer, Saudi Arabia, the bank said that it expected "to see Saudi Arabia hold and keep oil production steady in the face of declining prices."

OPEC has shown resolve to stick to the decision adopted at last year's policy meeting to pump oil vigorously to protect its market share against other producers like Russia and especially US shale drillers.

Financial traders are acting accordingly, with hedge funds' bullish wagers on US crude oil falling to a more than five-year low amid concerns that oil output in the United States was not falling fast enough to offset a global supply glut that has resulted in a more than 60 percent price rout since June last year.

US government data showed no meaningful decline in shale oil output in September despite a steady drop in rig counts, adding to a glut that is seeing 0.7-2.5 million barrels per day produced in excess of demand.

Morgan Stanley said that an increase in US interest rates expected to gradually start towards the end of this year will delay a rebound in oil prices.

"We think the US dollar continues to strengthen after a December liftoff, delaying the rebound in oil prices until 4Q16," the bank said.

The bank added that it saw oversupply in oil markets to persist until mid-2016.

"Oversupply in oil markets could disappear by year-end. This drives a 4Q rebound in our price expectations, which we expect to continue into 2017."