This is where oil could go if OPEC goes home empty-handed

Oil prices could quickly dive to $40 or lower if OPEC members leave Algeria without any promise of a deal.

Ministers were scheduled to meet Wednesday at the end of a three-day energy conference, after several days of on-again, off-again headlines on a possible deal to cut oil production by a reported million barrels a day.

"I think it really comes down to how they manage the message. It looks like they're not going to get any kind of hard agreement but can they keep hope alive for something on Nov. 30," said Helima Croft, global head of commodity strategy at RBC Capital Markets. "They have to go out and broadly say they're all on the same page, and they just have to work out the details."

Another factor for the oil market Wednesday could be U.S. crude inventory data, expected at 10:30 a.m. EDT. According to Platt's, analysts expect a build of 3.2 million barrels of crude. However, the American Petroleum Institute reported a draw of 752,000 barrels in its weekly report late Tuesday afternoon.

But the OPEC meeting could be the bigger driver of prices. West Texas Intermediate crude futures settled down 2.7 percent to $44.67 per barrel Tuesday as the prospect of a deal in Algeria faded. Brent fell nearly 3 percent to $45.94 per barrel.

"If it's a debacle, and they can't agree on anything, they're too far apart, and they make it look like nothing happened, and they get a build in inventories and rig counts are back up, could they test $40? Yeah," Croft said. OPEC's next official meeting is Nov. 30 in Vienna.

When the cartel attempted to freeze production in April, an agreement failed to come together because Iran would not commit to curb production and Saudi Arabia would not agree to a deal unless all members went along.

The two producers left little hope for a deal on Tuesday. Iran's oil minister, Bijan Zanganeh, said the Algiers talks are not "a time for decision-making," and Saudi Energy Minister Khalid al-Falih said he did not expect an agreement to come from the consultation on the last day of the energy conference.

"Our base case is we don't expect anything to come out of that meeting and these comments from Zanganeh support the fact that the Iranians are not going to be hemmed in by any restraints on their output at this point," said Michael Cohen, head of energy commodities research at Barclays.

Croft said it may be that the Iranians are trying to drive a hard bargain, and that their negotiating efforts will be taken the wrong way, bringing the talks to a quick end. "I'm getting shades of the nuclear talks where at the last minute, they kept putting in new demands," she said.

The talks toward a deal were serious, she said, noting Iranian and Saudi officials met in Vienna ahead the Algerian meeting.

"When the Saudis have to cut public sector wages by 20 percent, the Saudis are facing some challenges," she said. Saudi Arabia reduced worker pay and ministerial compensation this week.

John Kilduff of Again Capital said he has not been expecting an Algiers accord. "They may try to string us along one more time until November," he said, noting OPEC members could promise a future deal. "The market may get some support off of it, but I think we're getting tired of this act."

If there's no sign of an agreement, "oil could go below $40 pretty rapidly," he said.

Kilduff also said the oil market could be pressured by supply coming back from Libya, Nigeria and Venezuela.

"Some of the exports have returned in Nigeria and I do think we'll see Libyan production come in, in fits and starts," said Cohen, adding he remains skeptical on the political situation in Libya.

Cohen said he believes the market is rebalancing between supply and demand. He expects an average price of $52 per barrel for the fourth quarter.

Goldman Sachs early Tuesday cut its fourth-quarter outlook for crude prices to $43 from $50.