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Investors will be looking to see whether production is cut, and if so by how much. The extent will determine the reaction in oil prices. We have seen Brent Crude prices stabilise heading into the meeting, suggesting some are expecting OPEC to act. Brent crude is now back above $80/bbl and if we do see some action this week then this run could have a bit more room to go. Ideally, OPEC would want to balance the market on the supply side in order to stabilise prices, but this could prove difficult given the key producer, Saudi Arabia, has been the main instigator of the whole situation. Essentially the argument has resulted in a divide among the oil producing nations with Libya, Iraq and Iran unwilling to cut production while the likes of Venezuela and Ecuador are in favour of production cuts.
Consensus expectations are for a modest production cut as the big players like Saudi Arabia are unwilling to play ball. The price action risk though is for a short squeeze due to short market positioning. Needless to say should the meeting not yield any cuts, then we are likely to see the sell-off resume. Essentially this would confirm that OPEC does not have enough influence on the major producers to balance the market out. Either way, Thursday is shaping up to be a binary event for oil heading into the end of the week.