The OPEC and non-OPEC oil freeze meeting which held in Doha, Qatar met with a brick wall after the parties failed to agree on a freeze deal to boost price.
The conference’s failure sent crude prices tumbling in early trading on the NYMEX, which
fell by more than sixpercent as traders resumed the commodity’s sell-off.
Before the meeting, doubts were cast on minds after Iran made a last minute decision not to attend. Also, Saudi Arabia vowed not to freeze production unless other major producers
did the same.
Amidst disagreement between Iran and Saudi Arabia , nearly 20 of the world’s largest oil exporters could not find enough common ground to hold the line on output after marathon talks.
Mohammed Saleh al Sada, Qatar’s oil minister, told reporters that the group “needs more time” to construct the outlines of a deal to freeze output. However, he cited “improved fundamentals” as a reason why an immediate agreement wasn’t necessary. Earlier in the day, a draft accord proposed to hold output at January levels until at least October.
The dynamic has left the world awash in oil supply that has sent prices reeling. All eyes now
turn to June’s meeting of OPEC countries, where the cartel’s hand may be forced if crude prices begin another downward spiral. The failure of the summit could also lead to a renewed drop in crude prices, which only recently have begun to
John Kilduff, a partner with Again Capital, said the breakdown in Doha was not a surprise. “They were locking in record production so it made no sense,” he said of the Doha deal. “It seemed like a farce from the start and it turned out to be exactly that.”
Recently, oil prices have crept up from multi-year lows below $30, to levels just above $40 on Friday.
Brent crude, however, is far below a multi-year high above $100 set in 2014, and is down
nearly 40 percent over the last year.
The latest rally, which took crude 55 percent from its lows, was in part fueled by optimism producers would reach a deal to freeze production.
Tehran is strongly resistant to the idea of an output freeze, as it attempts to recoup lost market share after being freed from the yoke of Western sanctions. With the country declining to
participate, the meeting’s delegates appeared to doubt how effective a freeze could be if it did not include Iran.
“With Iran, we respect their position and through further consultation, we don’t know how their future will unroll,” Qatar’s oil minister said. “It was a sovereign decision by Iran. A freeze would definitely be more effective if OPEC and non- OPEC” participated he added.
Market observers had hoped that the meeting’s participants could strike a ‘gentleman’s
agreement’ that would at least save face and serve as a bridge to June’s OPEC meeting.
However, the collapse of the talks suggest that global crude prices may come under renewed
However, selling may be limited because of a strike in Kuwait that has taken more than 1.5
million barrels a day off line. Kuwait’s workers started an open ended strike last weekend over pay and benefit cuts.
Oil analysts say the failure of the Doha deal came down to the refusal of Saudi Arabia and Iran to agree, and it appears that Saudi Arabia Deputy Crown Prince Mohammad bin Salman was theone who made the final call.
The vast majority of OPEC’s member states are feeling the pinch of sagging oil, as revenue
derived from exports is used for lavish public spending and to pacify domestic pressures.
However, according to CNBC, it is widely suspected that countries such as Saudi Arabia, the world’s biggest oil producerand Iran are playing a game of economic chicken with U.S. oil producers.
The U.S. shale boom has driven up the world’s oil supply and depressed prices.
While consumers have received the equivalent of a massive tax cut through cheaper oil and gas prices, the drop in crude has made it uneconomic for many shale companies to continue to churn out oil.
Countries like Venezuela and Nigeria have fallen on hard times, while being forced to contemplate a “post-oil” era of economic diversification.