Oil price slump is not seen as calamitous for Gulf states. File Image / Pixabay
The usual suspects - signs of increased global crude production and the on going trade war between the U.S. and China - were said to be responsible for oil prices falling on Tuesday; however, the losses were tempered by hope that a decision will be made to slash output at the upcoming Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna.
Brent fell 27 cents to settle at $60.21 per barrel, while West Texas Intermediate fell 7 cents to settle at $51.56 per barrel.
All eyes now are on the Group of 20 nations (G20) summit on Nov. 30 and Dec. 1, with the hope that U.S. president Donald Trump, who has expressed a willingness to negotiate a trade deal with China, will manage to achieve such an agreement with Chinese leader Xi Jinping.
Dan Yergin, vice chairman, IHS Markit
In terms of oil the longs are all gone
Also at the summit will be Russia and Saudi Arabia, which has prompted onlookers to speculate that oil policy will be discussed.
Dan Yergin, vice chairman of IHS Markit, told CNBC's Squawk Box that he thinks the G20 meeting "will be very consequential, because people will look for it for signals in terms of the global economy."
Yergin placed equal importance in the following OPEC meeting, and he suggested that Saudi Arabia will be balancing on a fine line between addressing signs of overproduction in 2019 and not upsetting Trump, who wants the kingdom to keep pumping all-out in order to lower prices even further.
Yergin also said that if crude prices continue to fall, "producers both Saudi and non-OPEC Russia will try to make a deal" to boost them, and that for the time being "in terms of oil the longs are all gone."
Amid the idle speculation of what could or could not happen at both meetings comes word that even if the current low crude prices plunge further, it doesn't necessarily mean calamity - at least for operators in the U.S. Gulf states.
Capital Economics in a research note stated that prices as low as $40 to $50 per barrel won't significantly strain the larger economies of these states as long as tight fiscal policy is maintained, and that the balance of imports and exports are likely to stay in surplus.
However, the note also stated that gross domestic product growth will hover around 2 percent in coming years, lower than the expectations of most analysts.
Earlier this week, Goldman Sachs rounded out the `anything goes' picture for crude by saying that commodities offer an attractive entry point for longs in oil, and that prices will likely rebound in December and into next year.