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Will Oil Crash Again If OPEC Fails To Extend Its Deal? (USO)

Will Oil Crash Again If OPEC Fails To Extend Its Deal? (USO)

WTI Crude Oil was at $57.35 on Monday and dropped to $57.24 on Tuesday.

Saudi Arabia has arrested 11 princes and 38 sitting and former ministers and deputy ministers over corruption charges. It's thought the Saudi crown Prince will support keeping the cap in place, as higher oil prices are required for his economic plans.

Analysts said an upward momentum in oil market appeared to be waning on Tuesday, as investors took profit after recent gains.

Russia, a non-OPEC contributor to supply cuts, said it would be open to extending its 300,000 bpd cuts, which are enacted in addition to the bloc's reduction scheme.

Brent futures fell 20 cents, or 0.3 percent, to settle at $63.49 a barrel, while U.S. West Texas Intermediate crude fell 39 cents, or 0.7 percent, to settle at $56.81 per barrel.

If the cartel wants to target a higher price (which it won't officially communicate to the market), it will likely trigger a new wave of U.S. shale production next year. Economists had expected the index to dip to 100.0.

The U.S. Energy Information Administration (EIA) said in a report that U.S. crude production rose to 9.620 million barrels per day during the week of Nov. 3, the highest weekly output on record according to federal energy data going back to 1983. This is the source of market risk.

The high prices were a result of efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to tighten the market by withholding supplies, as well as strong demand and rising political tensions. But higher prices are a double-edged sword for OPEC-not only due to a possible renewed resurgence of U.S. shale, but also because of its own far-from-perfect track record of sticking to pledges when oil prices rise.

Another factor supporting prices was strong demand in southeast Asia, where the number of tankers holding oil in storage around Singapore and Malaysia has halved since June.

"Our base case is that we do not get a full-year extension on November 30", Ed Morse, head of commodities research at Citigroup, told Bloomberg. An OPEC extension is likely, but the current uptick in oil prices, rising geopolitical risks, and a steady decline in global stockpiles could push the definitive decision into 2018.

The University of Michigan released a report on Friday showing a bigger than expected pullback in consumer sentiment in the month of November.