All eyes are on the Organization of Petroleum Exporting Countries meeting in Vienna Wednesday as OPEC's self-imposed Nov. 30 deadline to reach an agreement to cut production looms with no deal finalized.
Crude oil prices surged on Wednesday on reports that the organization may agree to a compromise solution on output reductions that won't involved a freeze in production.
The 14-nation cartel, which accounts for a third of global oil production, made a preliminary agreement in September to cap output between 32.5 and 33 million barrels per days, compared to the current 33.64 million barrels per day.
Traders will be looking for OPEC to not only reach an agreement, but also be able to successfully implement it.
Libya and Nigeria have been exempt from the cuts as the output has been hindered by unrest and sanctions. Meanwhile, OPEC's Number 2 and 3 producers, Iraq and Iran, have been resisting pressure to curb production. Iraq claims it should be exempt as its needs oil revenues to fund its war against ISIS militants, while Iran says it should be allowed to maintain output to regain market share and revenues lost when it was subject to sanctions.
But, Saudi Arabia's energy minister said he believed the group was close to reaching a deal on Wednesday.
In the days and weeks leading up to the meeting, oil prices reacted strongly to any news coming from the cartel. Gaining when OPEC seemed near to an agreement, and falling quickly on news of no agreement.
Ahead of the meeting, oil stocks were mimicking the volatility in oil prices. The Energy Select Sector SPDR ETF (XLE) was down on Tuesday as crude oil prices tumbled. Some integrated oil majors such as Chevron (CVX) and ExxonMobil (XOM) were also lower during the trading session Tuesday.
TheStreet's Jim Cramer says he does not like oil stocks here because of the uncertainty surrounding the deal. Cramer notes that the stocks moved up big on the basis of a deal, so he says to be very careful of oils.
If there is no deal, analysts anticipate prices dropping to the low $40s. However, if the organization can reach an agreement, analysts see oil prices jumping to $50 a barrel or greater.
Analysts with RBC Capital Markets say 70% of investors expect OPEC to announce a production cut on Wednesday.