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News: Investors Expect Oil Selloff Should OPEC Deal Collapse

As tensions arise between OPEC countries in the runup to the November 30 meeting, investors are preparing for the worst and expecting a fall in energy stocks should a deal fail to be clinched.

On Monday crude price fell by 0.3 per cent to $US47.1 per barrel, and energy stocks declined by 1.8 per cent.

Iran and Iraq have reportedly persisted on higher output numbers, according to unnamed sources.

“We hope we (will) have agreement,” said Jabar Ali al-Luaibi, Iraq’s Oil Minister on Monday upon arriving in Vienna for the talk. “We will cooperate with OPEC members to reach agreement acceptable to all.”

Experts expect oil selloff should OPEC fail to reach a deal. “People know if OPEC doesn’t do a deal, all the short-term drivers for the oil price will be off the table,” said Romano Sala Tenna, portfolio manager at Katana Asset Management.

Collapse in talks could send crude prices below $US40, said Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co.

Others are more optimistic. There is a chance that OPEC could agree to cut production by more than 500,000 barrels, said Helima Croft, RBC Capital Markets’ global head of commodity strategy.

“OPEC’s leadership is cognizant of the risks posed by failing to reach a deal,” Croft wrote in a report. Should a deal be reached, Croft said oil prices could climb back to $US55 per barrel.

The Organisation of the Petroleum Exporting Countries will meet on Wednesday, November 30 in Vienna to establish the terms of its first production cut in eight years.

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