The future of crude oil received a severe blow as attempts to save oil prices from further plunging fell apart at a meeting held in Doha, capital of Qatar.
Tensions between rivals Saudi Arabia and Iran ruined prospects of the first binding oil output deal in 15 years between members of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC nations.
18 nations made up of OPEC and non-OPEC oil producers, including Nigeria, Angola, Algeria, Libya, Saudi Arabia, Iran, Iraq, Kuwait, Qatar, Venezuela, United Arab Emirates, Indonesia, Mexico, Bahrain, Oman and Russia, had gathered in Doha with the intention of sealing a deal to freeze oil production at January levels until October 2016.
But the meeting reached a “no deal” and was postponed to June 2, 2016, after Saudi Arabia insisted it wanted all OPEC members, including Iran, to take part in the freeze or there would be no deal.
“I’m not really surprised . It was always going to be difficult to get a freeze agreement, but even a freeze wouldn’t have changed much in the market. Iran has always made it clear that they want to get back to pre-sanction level at 4 million barrels a day, that’s about 800 000 barrels of production increase over the next two years. Once Iran reaches that production, maybe there can be a discussion.”
“I think it’s going to be difficult [for possible agreement between Saudi Arabia and Iran over in the next two years]because of the geopolitical aspects. Saudi Arabia is already producing at its max. Saudi Arabia also doesn’t trust the partners because whenever there has been an agreement to cut production, Saudi Aribia is the only one who has cut production while all the other OPEC members continue to produce at maximum capacity.”
“What we’re going to see is decreasing supply and increasing demand so naturally the market will rebalance.”
“The only thing that is going to save the market right now is more of a production cut than a production freeze. Freezing production and maximum capacity, assuming that Iran will only agree to production freeze once they’ve increased the production to 4 million barrels per day, which means OPEC is producing at maximum capacity which is not going to help the market. The only thing that would help the market is a production cut.”