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by Stockwatch Business Reporter
West Texas Intermediate crude for January delivery plunged $3.07 to $55.17 on the New York Merc, while Brent for January lost $1.52 to $62.43 (all figures in this para U.S.). Western Canadian Select traded at a discount of $19.65 to WTI, unchanged. Natural gas for January lost 20 cents to $2.28. The TSX energy index lost 2.25 points to close at 131.42.
Oil benchmarks quaked and traders trembled before bearish OPEC rumours. As noted in Tuesday's Energy Summary, OPEC will meet at its Viennese headquarters next week on Thursday, Dec. 5, and will discuss the three-year-old production-cutting pact among OPEC members and various non-OPEC countries (particularly Russia). Several countries (particularly Russia) have been "cheating" on the pact and producing above their quotas. Today, Bloomberg reported that Saudi Arabia, which has been deliberately underproducing in order to compensate for the cheaters, has had enough of turning a blind eye and might punish the cheaters by boosting production right up to its quota. This would flood the market with over 500,000 additional barrels a day and put pressure on prices. Lower prices would hurt Saudi Arabia, of course, but they would also hurt the cheaters and give them an incentive to get back in line -- or so goes the theory. The reason for Saudi Arabia's potential hardening of its heart toward cheaters could reflect simple timing. On Dec. 5, the same day as the OPEC meeting, state oil company Saudi Aramco will price its initial public offering. The kingdom previously needed oil prices to stay relatively stable in order to forge ahead with this IPO, but once the shares are priced, it will have less reason for restraint. Investors will have to wait until next week to find out.
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