Oil could collapse into the $30s if OPEC doesn't keep its act together

When they meet in Kuwait Sunday, a handful of OPEC and other oil producers are expected to put a happy face on their production agreement, and they should point to the potential for extending the deal in May.

That should help support oil prices, after the recent 10 percent plunge since investors began to doubt the deal earlier this month. The international benchmark Brent crude temporarily fell below the psychological $50 level this week.

Representatives of the five monitoring countries this weekend are expected to review where producers stand on compliance with the six-month agreement to remove 1.8 million barrels a day from the market. As president of OPEC, Saudi Energy Minister Khalid Al-Falih is expected to attend, along with representatives from the five members of the monitoring committee — Kuwait, Algeria, Venezuela, and non-OPEC nations Russia and Oman.

"Without the production cut agreement, I think you could basically target the low-to-mid $30s. I'm of the mind they extend it," said Gene Marcial, manager market research at Tradition Energy. "The Saudis need the revenues from higher oil prices. They know that prices at $30 to $35 is trouble for them."

But by early March, U.S. producers, lured by steadier prices, continued to increase their own production, bringing it within a half million barrels a day of its previous high. That glut weighed on sentiment, and doubts about the producer agreement arose when the Saudi energy minister reiterated that the kingdom would not shoulder the brunt of the cuts if other producers did not meet their commitments. Al-Falih's remarks were made at the CERAWeek energy conference in Houston, and at the same meeting, Iraq's oil minister revealed that his country was moving toward 5 million barrels of production by mid-year, representing an increase.

More information about what they think OPEC can do about it will be after the meeting on Sunday.

CNBC

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