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If No OPEC Deal Is Reached, Price Of Oil Will 'Hit $40 Well Before It Has Any Chance Of Hitting $50'

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If No OPEC Deal Is Reached, Price Of Oil Will 'Hit $40 Well Before It Has Any Chance Of Hitting $50'

Crude oil rose Monday on further optimism that an OPEC agreement to limit oil output can be reached. However, OPEC's largest and most influential producer, Saudi Arabia, made it clear it's unlikely to agree to any terms unless its rival Iran agrees in kind.

Bloomberg, citing a Barclays report, explained why Iran is unlikely to agree to any output freezes since it is aggressively pursuing lost market share over the years due to an economic embargo.

Related Link: Survey: No OPEC Deal Expected, Oil Spikes 3% Regardless

As noted by Bloomberg, Iran's oil market share in Asia and Europe are notably lower today than they were in 2010. Specifically, Iran's market share in both regions were very close to 5 percent. Today, its market share in Asia is around 2.5 percent and its market share in Europe is lower at around 1.5 percent.

Barclays argued that since global oil demand is higher today than it was six years ago, Iran would need to further increase its production by 300,000 barrels per day just to reach a 2.5 percent market share level in Europe.

As such, it's highly unlikely that Iran will agree to an output freeze. This was a sentiment shared by Scott Bauer of Trading Advantage.

Speaking to Bloomberg TV, Bauer pointed out that the price of oil traded at the $44.50 during the overnight session which coincided with last week's lows.

If OPEC members fail to reach an agreement this week then Bauer expects oil to dip below the $44.50 level and will "probably it $40 well before it has any chance of hitting $50."

 

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